Elegancy Jewellers Ltd specialises in the manufacturing and sell of Wedding Rings. Variants produced are below:

$1.$ Gold $$ produced and coated with real gold as standard.

$2.$ Silver $$ produced and coated with real silver as standard.

$3.$ Bronze $$ produced and coated with a mix of copper and tin as standard.

Each of these wedding rings passes through a coating process. Elegancy Jewellers Ltd currently only has one coating machine with no capacity to acquire a new machine in the short to medium term. The company budgets production based on available annual coating machine capacity of $14,598$ hours

Maximum market demand and coating hours requirements for each of these wedding rings for year ending $31$ December $2024$ are shown below:

Budgeted data year ending $31$ December $2024$

Gold Silver Bronze

Maximum demand $9,7407,4505,220$

Coating Machine Hours $0\mathrm{.}8$ hours $0\mathrm{.}5$ hours $0\mathrm{.}6$ hours

Coating Machine Hours $7,7923,7253,132$

Elegancy Jewellers Ltd$$s implemented and operates under a Total Quality Management system and has instilled Quality Assurance in its processes in light of the coating machine hours constraint.

Rebecca Reeves, Elegancy Jewellers Ltd$$s Sales Director has reported to the Planning Committee that she has already signed a once off $8,500$ Silver Rings Contract with Smart$2050$ Wedding Supplies Ltd$,$ a renowned wedding supplies retailer. If this contract is not fulfilled, Elegancy Jewellers Ltd would incur a financial penalty of $12,000.$ This order is not included in the Silver$$s maximum market demand figure. This implies Elegancy Jewellers Ltd should prioritise fulfilment of the Silver Rings Contract ahead of normal annual demand requirements. The agreed contract selling price per Silver Ring is the same as normal Silver Ring.

Elegancy Jewellers Ltd$$s directors need to know whether they should go ahead and satisfy $($honour$)$ the contract and then prioritise production in the normal way or whether they should consider breaching $($dishonouring$)$ the Smart$2050$ Wedding Supplies Ltd$$s Silver Rings Contract.

You have been provided with the following actual results for years ended $31$ December $2022$ and $31$ December $2023$ below.

Actual results for year ended $31$ December $2022$

Gold Silver Bronze Total

Sales $($Number of rings$)8,6905,6403,230$

Sales Revenue $()3,997,4001,511,520387,6005,896,520$

Raw Materials $()(1,520,750)(535,800)(58,140)(2,114,690)$

Direct Labour $()(1,390,400)(451,200)(129,200)(1,970,800)$

Semi$-$Variable Overheads $()(754,000)(182,000)(112,000)(1,048,000)$

Profit$/($Loss$)()332,250342,52088,260763,030$

Actual results for year ended $31$ December $2023$

Gold Silver Bronze Total

Sales $($Number of rings$)9,4206,8403,900$

Sales Revenue $()4,728,8401,949,400546,0007,224,240$

Raw Materials $()(1,695,600)(684,000)(97,500)(2,477,100)$

Direct Labour $()(1,648,500)(615,600)(195,000)(2,459,100)$

Semi$-$Variable Overheads $()(760,000)(190,000)(120,000)(1,070,000)$

Profit$/($Loss$)()624,740459,800133,5001,218,040$

The selling price per ring, raw materials, direct labour costs and other overheads per ring for year ending $31$ December $2024$ will be the same as those in year ended $31$ December $2023.$

Required:

Use Management Accounting techniques for example High$-$Low Method where necessary and applicable.

$3\mathrm{.}1.$ In light of the scenario above, rank these three wedding ring variants $($Gold$,$ Silver and Bronze$)$ in the order in which they must be produced by Elegancy Jewellers Ltd $$ Rank $1$ being the one to be prioritised. Clearly show your workings.

$3\mathrm{.}2.$ Prepare a Budgeted Production Schedule and a Marginal Costing Income Statement $($analysed by product$)$ the year ending $31$ December $2025$ assuming that the Silver Rings Contract is honoured. $[3$ marks for the Production Plan, $5$ marks for the Marginal Costing Income Statement$]$

$3\mathrm{.}3.$ Prepare a Budgeted Production Schedule and a Marginal Costing Income Statement $($analysed by product$)$ the year ending $31$ December $2025$ assuming that the Silver Rings Contract is not honoured. $[3$ marks for the Production Plan, $5$ marks for the Marginal Costing Income Statement$].$