accounting

Question 1 Giftworld PLC produces gifts for the tourism industry and has been operating in England for ten years. By analysing its financial results over time to maximise profits the company has focused production on three main items, keyrings, drinks coasters and fridge magnets. As a consequence of the improvement in the economy, Giftworld PLC has recently received orders from new customers. While delighted with the orders, the production director is concerned about the company's capacity to produce the items required. Details extracted from the company's budgeted management accounts and other relevant information are shown below: 1. Production information per unit Coasters Selling Price Materials Labour Keyrings 1.40 0.50 0.30 2.65 0.75 0.45 Fridge Magnets 1.20 040 0.15 2. Total budgeted production overheads for the year are expected to be 211,250. Twenty percent (20%) of all production overheads are variable and are allocated to products on the basis of labour hours. Fixed production overheads are considered to be period costs. 3. Budgeted annual demand for the three products, including the new orders received is as follows: Keyrings Coasters Fridge Magnets 132,500 units 60.400 units 100.000 units 4. The company has budgeted to pay its workers a fixed rate of 12 per hour and has included 6,500 labour hours for the year in its budget. REQUIREMENT: a. Prepare calculations to show whether Giftworld PLC will have sufficient production capacity to meet budgeted demand for its products. (12 marks) b. Compute the optimal production plan for Giftworld PLC and show the annual profit expected (20 marks) c. Briefly explain the following terms, providing Ayamonti