Required:

Use management accounting techniques for example High-Low Method where applicable.

3.1 Applying marginal costing techniques, rank the products [6 marks]

3.2 Prepare a budgeted production schedule and a marginal cost income statement (analysed by product including the total) for the year ending 31 August 2023 assuming that the Metal contract honoured [8 marks]

3.3 Prepare a budgeted production schedule and a marginal cost income statement (analysed by product including the total) for the year ending 31 August 2023 assuming that the Metal contract IS NOT honoured [8 marks]

3.4 Considering calculations above and other qualitative issues, advise Euro Engineering Ltd directors whether to honour or dishonour the Metal Percolator Contract [3 marks]

3.5 Budgeting serves various purposes including planning, control, motivation and communication. You have been requested by Clara Ores the Finance Director to explain to Euro Engineering Ltd directors the importance of budgeting in light of the purposes above [5 marks]

Euro Engineering Ltd manufactures three types of ceramic coffee percolator; the Metal, pink and the Zinc models. The maximum market demand and resource requirements of each of these products are shown below. The percolators are made from an advanced heat-resistant material that gives the firm a competitive advantage. An email from the purchasing manager has informed you that, because of a problem with the supplier, it should be assumed that the half year's supply of this special material is limited to 80,000kg. Euro Engineering Ltd operates on a just-in-time production (JIT) method so that opening and closing inventory levels are zero. The sales director has already accepted an order for 5.000 Metal percolators that, if not fulfilled, would incur a financial penalty of 12,000. This order is included in the Gold's maximum market demand figure. Continental's directors need to know whether they should go ahead and satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. The selling prices, raw material costs, labour costs and other variable overheads rates per unit for 2023 financial year will be the same as those in 2022 . Budgeted data for the first year ended 2023 Actual results for August 2022 Actual results for August 2021 Euro Engineering Ltd manufactures three types of ceramic coffee percolator; the Metal, pink and the Zinc models. The maximum market demand and resource requirements of each of these products are shown below. The percolators are made from an advanced heat-resistant material that gives the firm a competitive advantage. An email from the purchasing manager has informed you that, because of a problem with the supplier, it should be assumed that the half year's supply of this special material is limited to 80,000kg. Euro Engineering Ltd operates on a just-in-time production (JIT) method so that opening and closing inventory levels are zero. The sales director has already accepted an order for 5.000 Metal percolators that, if not fulfilled, would incur a financial penalty of 12,000. This order is included in the Gold's maximum market demand figure. Continental's directors need to know whether they should go ahead and satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty. The selling prices, raw material costs, labour costs and other variable overheads rates per unit for 2023 financial year will be the same as those in 2022 . Budgeted data for the first year ended 2023 Actual results for August 2022 Actual results for August 2021