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I have captured my question with all necessary details please help . it's management accounting Ethereal Ltd. (Ethereal) sells the entity's own skincare lines to
I have captured my question with all necessary details please help . it's management accounting
Ethereal Ltd. ("Ethereal") sells the entity's own skincare lines to the public and external entities. Ethereal has a 28 February financial yearend. One of Ethereal's product lines is a Vitamin B3 intense moisturiser called "DermaB3". DermaB3 is sold in 50ml and 100ml-bottles. The approved sales prices of DermaB3's are R800 and R1 900 for 50ml-Derma and 100ml-DermaB3 respectively. Ethereal purchases the Vitamin B3 intense-lotion from an external party, Flexi Lab (Pty.) Ltd ("Flexi Lab"). Flexi Lab is a laboratory which develops and manufactures the moisturising lotion on behalf of Ethereal. Ethereal initially sent the requirements Ethereal had for a Vitamin B3-moisturiser to Flexi Lab. The two parties then entered into conversations and agreed on a formula. Within Flexi Lab, dermatologist and pharmacists develops the moisturising lotion according to the agreed formula and then sells this finished lotion to Ethereal at R1 400 per litre. As Flexi Lab also has other customers, Flexi Lab is only able to deliver 700 litres to Ethereal per month. The approved Vitamin B3-moisturising lotion is not readily available in the market as it was specifically developed and customised for Ethereal by Flexi Lab. Once the Vitamin B3-lotion has been purchased from Flexi Lab, Ethereal employees (hereafter referred to as Type 1 employees), place the lotion into Machine XED. Machine XED assists with bottling the purchased lotion on large scale into either the 50ml or 100ml bottles. Machine XED can bottle both sizes and Type 1 employees enter the required size into Machine XED's settings. The entire volume of the bottles is filled with the lotion. From past bottling activities it has been established that Machine XED can fill 70, 50ml-bottles in an hour, and 32, 100ml-bottles in an hour. As the Machine XED must be pre-set for it to fill a 50ml-bottle or 100ml-bottle, only one of two the sizes can be filled per batch. A batch consists of 200 bottles (irrespective of the bottle size). Due to the setting requirements of the machine and filling activities, Machine XED requires Type 1 employees to operate it. Type 1 employees however only work for 40 unemployed labourers available which can be appointed as Type 1 employees. Type 1 employees are paid R115 per hour. 3.9 Type 1 employee hours are required per 50ml batch and 5 hours per 100ml batch to get the product ready for sale. The 50ml and 100ml-bottles in which DermaB3 are packaged, are purchased from Package Solutions Ltd. at R0.88 per 50ml-bottle and R1.20 per 100ml-bottle. Additional information: - The manufacturing overheads of DermaB3 production delivered the following results in the 2022 financial year: - Machine XED was purchased on 1 March 2021 for R3 360000 and has been used from the day of purchase. - The building in which Derma B3's operations take place was purchased on 1 March 1999 for R5 550000 and has been utilised since the day of purchase. - The operation manager's salary is R47 000 per month. - Ethereal utilises the traditional costing method and machine hours are used as allocation basis. - Assume that the market demand for both 50ml and 100ml DermaB3 are unknown seeing that it was unsaturated in the past. Respectively for 50ml and 100ml DermaB3, advise Ethereal Ltd. on the quantity of 50ml and 100ml DermaB3 that the entity should manufacture in March 2023 to maximise the entity's profit and contributionStep by Step Solution
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