Willards Zimbabwe manufactures Cornflakes for the local market and for the export market. The management accountant has
Question:
Willards Zimbabwe manufactures Cornflakes for the local market and for the export market. The management accountant has provided the following standard costs.
Selling Price Materials
Labour (See note 1) Variable Overheads Fixed Overheads
Note 1
6 kg at $100 per kg
20 hours at $20 per hour
25 Machine hours at $8 per machine hour Note 2
$1 500 600 400 200 240
A 90 % learning curve index curve is assumed to apply throughout the period and the Learning index for a 90% learning curve is -0.152. The labour hours are the average labour hours per unit based on the budgeted output for the period of 128 units.
Note 2
The fixed overheads are specific fixed overheads for Cornflakes and the absorption rate was based on the budgeted output for the period of 128 units.
Required
Calculate the sensitivity of the budgeted profit for the period for this product to a change in the price per kg of materials.
Calculate the budgeted labour hours for the first unit of this product to be produced.
Calculate the sensitivity of the budgeted profit for the period for cornflakes to a change in the rate of learning.
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett