Last month you took over the position of Management Accountant at Boron Brothers Pty Ltd which makes toys for children at its factory located in Logan. The documents relating to the next year budget show the following information in relation to three toys that Boron Brothers Pty Ltd plans to make and sell next year.

TEDDYS SCOOBYS BUNNYS

Direct materials per unit $12.00 $15.00 $18.00

Direct Labour per unit $9.00 $15.00 $20.00

Variable O/H per unit $11.80 $14.95 $24.85

Fixed O/H per unit $5 $7.50 $9.75

Fixed Marketing Costs per unit $1.50 $2.00 $2.75

Head Office allocated costs per unit $3.00 $3.50 $3.75

Selling Price per unit $40 $57 $78

Machine Hrs per unit 0.4hrs 0.7hrs 0.9hrs

Demand 12,000 units 12,000 units 6,000 units

The total machine hours available in the next year are limited to 12,000 hours due to major maintenance work that needs to be carried out every 5 years on some machines. The production manager has indicated that it is not possible to meet the total demand for the three toys due to this reduction in the available machine hours. The managing director has asked you to decide on the product mix for the next year to maximise the profits from the available machine hours.

Required;

Out of the information in the budget documents given above, state which information is NOT relevant to deciding the product mix to maximise the contribution to company profits (15 marks).

Using the relevant information given above, calculate the optimum product mix that would maximise the contribution to company profits (50 marks). Estimate the contribution to profits that would result under the product mix that you calculated (15 marks).

The company is not in a position to make any capital expenditure during next year to increase the machine capacity. Write a report to the Managing Director (not exceeding half a page) suggesting alternative strategies that can be used to meet the demand which is not met under the product mix you recommended. Your report should also indicate briefly the risks associated with the strategies that you are suggesting (20marks).

3104AFE STATEGIC MANAGEMENT ACCOUNTING INDIVIDUAL ASSIGNMENT Assessment weight: 10% Due date and time: 12th OCTOBER 2015, before 8:00 am 1. SUBMISSION All submissions should be made on line which is a requirement under University Policy. No hard copies will be accepted. The submission point can be found in the \"Assignment\" folder under the \"Assessment\" option of the course web site at Learning @ Griffith. Your submission should be in a Microsoft Word format file. You must attach a standard cover sheet to your assignment. A copy of a standard coversheet is given in the \"Assignment\" folder under the \"Assessment\" option of the course web site at Learning @ Griffith. 2. NOTE To be fair by all the students in this course: 1. No extensions will be granted (refer the course profile). 2. Convenors/ tutors will not give any individual feedback/help/clarification on the work prior to submission. Any information relating to the Assignment will be posted on the web or announced in the lectures so that everybody gets the same information. 3. ASSIGNMENT This assignment is marked out of 100. It has a 10% weight on your final assessment. Last month you took over the position of Management Accountant at Boron Brothers Pty Ltd which makes toys for children at its factory located in Logan. The documents relating to the next year budget show the following information in relation to three toys that Boron Brothers Pty Ltd plans to make and sell next year. TEDDYS SCOOBYS BUNNYS Direct materials per unit $12.00 $15.00 $18.00 Direct Labour per unit $9.00 $15.00 $20.00 Variable O/H per unit $11.80 $14.95 $24.85 Fixed O/H per unit $5 $7.50 $9.75 Fixed Marketing Costs per unit $1.50 $2.00 $2.75 Head Office allocated costs per unit $3.00 $3.50 $3.75 Selling Price per unit $40 $57 $78 Machine Hrs per unit 0.4hrs 0.7hrs 0.9hrs Demand 12,000 units 12,000 units 6,000 units The total machine hours available in the next year are limited to 12,000 hours due to major maintenance work that needs to be carried out every 5 years on some machines. The production manager has indicated that it is not possible to meet the total demand for the three toys due to this reduction in the available machine hours. The managing director has asked you to decide on the product mix for the next year to maximise the profits from the available machine hours. Required; A. Out of the information in the budget documents given above, state which information is NOT relevant to deciding the product mix to maximise the contribution to company profits (15 marks). B. Using the relevant information given above, calculate the optimum product mix that would maximise the contribution to company profits (50 marks). Estimate the contribution to profits that would result under the product mix that you calculated (15 marks). C. The company is not in a position to make any capital expenditure during next year to increase the machine capacity. Write a report to the Managing Director (not exceeding half a page) suggesting alternative strategies that can be used to meet the demand which is not met under the product mix you recommended. Your report should also indicate briefly the risks associated with the strategies that you are suggesting (20marks)