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Section B: Question 1: A company manufactures and sells a single product which incurs fixed costs of 30,000 and total variable costs of 1,995,000 per annum. Annual sales are 2,100,000 with a selling price of 30 per unit Required: a) Calculate the break-even point in units (8 marks) b) Explain to the manager how the breakeven calculation assists the manager in their decision making (2 marks) c) Calculate the margin of safety in units and as a percentage (5 marks) d) How many units should the company sell to achieve a profit of 25,000 (5 marks) Question 2: FLG Co wishes to minimise its inventory costs. The quarterly demand for a raw material costing 12 per unit is 15,000 units. Inventory management costs for this raw material are as follows: Ordering cost: 6 per order Holding cost: 50 pence per unit annually The supplier of this raw material has offered a bulk purchase discount of 5% for orders of 10,000 units or more. If bulk purchase orders are made regularly, it is expected that annual holding cost for this raw material will increase to 2 per unit per year. Required: A. Calculate the EOQ to the nearest ones (5 marks) Calculate the total cost of inventory for the raw material when using the economic order quantity (7 marks) C. Advise whether accepting the discount offered by the supplier will minimise the total cost of inventory for the raw material. (10 marks) B. 2CD C Note: Economic order quantity Q.Ch holding costs 2 COD ordering costs = Q Question 3: MAKE Ltd is a manufacturing organisation that supplies the construction industry with two products (Frame and Joint). Both products go through two production departments, a machine shop and a fitting section. These production departments are supported by the service provided by the two service departments, a canteen and a machine maintenance section. Shown below are budgeted production data and manufacturing costs for the company: Product Frame Product Joint 8,000 units 10,000 units Production Direct materials 22 per unit 28 per unit Direct labour: Machine shop 12 per unit 8 per unit Fitting section 24 per unit 6 per unit Machine hours per unit 6 hours per unit 3 hours per unit Department Total Machine shop Fittings section Canteen Machine maintenance section 176,000 54,000 38,000 32,000 52,000 34,000 50,000 Budgeted overheads : Allocated overheads Rent, rates, heat and light Depreciation and insurance of equipment Additional Data: Net book value of equipment Number of employees Floor space occupied (m") Machine maintenance usage 150,000 75,000 30,000 45,000 18 14 4 3,600 1,400 1.000 800 60% 40% Required: a) Prepare an overhead analysis sheet showing the basis for allocation of the other costs to departments (15 marks) b) If the absorption method is machine hours for the machine shop and 50% of direct wages incurred in the fitting section for the fitting section, calculate an absorption rate for each production department (5 marks) c) Calculate is the total cost of each product manufactured (14 marks) Required: a) Prepare an overhead analysis sheet showing the basis for allocation of the other costs to departments (15 marks) b) If the absorption method is machine hours for the machine shop and 50% of direct wages incurred in the fitting section for the fitting section, calculate an absorption rate for each production department (5 marks) c) Calculate is the total cost of each product manufactured (14 marks)