A cellular phone manufacturer situated in Kalabo district of western province

(katondo cellular phones limited) produces three types of cellphones: Basic, Super

and Delux. For the current year the company has a total of 10,000 direct labour

hours and 7,500 machine hours available for production.

Here below, are the sales and production parameters relating to the three types of

cellphones:

Basic Super Delux

Direct material @ K24/kg 0.75 kgs 0.625 kg 1.25 kg

Direct labour @ k24 per hour 0.125 hour 0,125 hour 0.25 hour

Variable overhead 150% of direct

Labour cost - - -

Machine hours required 0.15 hours 0.1 hours 0.125 hours

Sales demand for one year (units) 30,000 18,000 15,000

Selling price per unit K68 K120 K170

Budgeted fixed production overhead is estimated to be K182,280 per month and the

company has also budgeted for selling and administration expenses of K378,988 per

quarter.

Required

(a) Compute for Katondo limited the optimal production plan and the expected

profit.( 12 marks)

(b) Discuss any four purposes of a system of standard costing (3 marks)

(c) Discuss any three different levels of performance which may be included as

part of system of standard costing and comment on how these may relate to

the purposes set out in (b) above. ( 3 marks)