Sports ltd manufactures a single component which is meant for the local market only. The monthly demand varies from month to month. During the month of April 2019, 500 units were produced incurring the following expenses:

.............................................................................Sh ‘000’
Direct materials .....................................................70
Direct labour ..........................................................60
Rent .........................................................................35
Electricity (30% fixed) .............................................25
Property, taxes and rates (70% variable) ............60
Technical support (Fixed) ....................................35
..............................................................................285

Required:

i) Sport ltd manager thinks that although there are various methods that can be applied to determine the total cost of production of this component, the accounts analysis method would be a more appropriate method in this case. Show how this method can be useful in coming up with the total cost prediction model.

ii) Sports ltd intends to produce 700 units during the month of June 2019. Estimate the cost to be incurred

iii) Assuming the company has a total budget of sh 500, 000 for the month of June 2019, how many units would be produced assuming the same model.