Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 0 . 1 1 There is a continuing demand for three sub - assemblies, A , B , and C , made and sold

10.11 There is a continuing demand for three sub-assemblies, A, B, and C, made and sold by MW Limited. Sales are in the ratios of A: 1,B:2,C:4, and selling prices are A: R215, B: R250, C: R300.
Each sub-assembly consists of a copper frame onto which are fixed the same components but in differing quantities, as follows:
\table[[Sub-assembly,Frame,Component,Component,Component],[,,D,E,F],[A,1,5,1,4],[B,1,1,7,5],[C,1,3,5,1],[Buying in costs per unit,R20,R8,R5,R3]]
Operation times by labour for each subassembly are:
\table[[Sub-assembly,Skilled hours,Unskilled hours],[A,2,2],[B,1.5,2],[C,1.5,3]]
The skilled labour is paid R6 per hour, and unskilled labour is paid R4.50 per hour. The skilled labour is located in a machining department, and the unskilled labour in an assembly department. A five-day week of 37.5 hours is worked, and each accounting period is for four weeks. Variable overhead per sub-assembly is A: R5, B: R4, and C: R3.50. At the end of the current year, stocks are expected to be as shown below, but because interest rates have increased and the company utilises a bank overdraft for working capital purposes, it is planned to effect a
Budgets
10% reduction in all finished sub-assemblies and bought-in stocks during Period 1 of the forthcoming year.
Forecast stocks at current year end are:
\table[[Stock,Quantity],[Sub-assembly A,300],[Sub-assembly B,700],[Sub-assembly C,1600],[Copper frames,1000],[Component D,4000],[Component E,10000],[Component F,4000]]
Work-in-progress stocks are to be ignored.
Overheads for the forthcoming year are budgeted to be as follows:
Production
R728000
Selling and distribution R364000
Administration R338000
These costs, all fixed, are expected to be incurred evenly throughout the year and are treated as period costs.
Within Period 1, it is planned to sell one thirteenth of the annual requirements, which are to be the sales necessary to achieve the company profit target of R6.5 million before tax.
Required:
(a) Prepare budgets in respect of Period 1 of the forthcoming year for
(i) sales, in quantities and value
(ii) production, in quantities only
(iii) materials usage, in quantities
(iv) materials purchases, in quantities and value
(v) labour force budget, that is, numbers of people needed in each of the machining department and the assembly department.
(b) Discuss the factors to be considered if the bought-in stocks were to be reduced to one week's requirements. This has been proposed by the purchasing officer but resisted by the production director.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Carl Warren, James M. Reeve, Philip E. Fess

8th Edition

0324025394, 978-0324025392

More Books

Students also viewed these Accounting questions