Question
Maya Ltd is anticipating that 9,965 units will be sold in the first year of business. The Company manufactures a single product which sells at
Maya Ltd is anticipating that 9,965 units will be sold in the first year of business. The Company manufactures a single product which sells at a price of €21. The variable costs associated with producing the product are as follows:
Packaging | €2 per unit |
Labour | €3 per unit |
Raw Materials | €1 per unit |
The Company is also required to pay rent of €10,027 per annum, and insurance of €6,681 per annum.
Longford Limited produces garden gates and furniture. It has two departments – welding and finishing. The company allocates production overheads on a factory-wide basis using machine hours as the allocation base.
The budgeted overheads for 2021 are €704,429.
The budgeted labour hours for 2021 are 56,000.
The budgeted machine hours for 2021 are 51,014.
What is the overhead allocation rate for Longford Limited for 2021
At the beginning of 2020, Armagh Limited set its overhead allocation rate at €12 per machine hour on the basis that there would be 270,000 machine hours used during 2020. The actual number of machine hours during 2020 was 282,000 and the actual overheads incurred were €3,400,000.
The under or over recovery of overheads for 2020 was € of an recovery
Wexford Limited specialises in manufacturing bespoke furniture for commercial clients. It allocates overheads on a factory-wide basis, using machine hours as the allocation base. The budgeted overheads for 2021 are €1,840,000. The budgeted machine hours are 115,000 and the budgeted labour hours are 40,000. Labour costs €50 per hour.
You are given the following information in relation to the “Slaney Job”.
Materials €7,500
Machine hours 35
Labour hours 24
Doire Teoranta needs to upgrade its payroll system. The management accountant has produced a report showing the costs related to undertaking this project in-house. The report sets out the costs as follows:
Cost | € |
Direct labour (100 hours) | 20,000 |
Variable overheads | 2,335 |
IT Director – 10% of time | 3,000 |
Direct Materials | 826 |
Fixed Overheads | 3,030 |
You are advised that the direct labour hours relate to employees currently working for Doire Teoranta who are currently under-utilised and have the spare capacity to undertake this project. If the project is outsourced, they would still continue to be employed by the company. Similarly, the IT director has the capacity to supervise this project without impacting on any other jobs.
On the basis of the information provided what is the relevant cost of completing this project in-house?
Clare is currently employed in the retail sector, earning a salary of €18,488 per annum. She drives to work and spends €1,228 each year on parking and fuel related solely to her work commute. She is considering setting up a business as a children’s entertainer. If she does, she will have to give up her retail job. She will have to pay €3,398 per annum in insurance for the new business and she estimates that the advertising, supplies and other costs will come to €3,802 for the first year. She will use her current mobile phone as the contact number of the new business. She entered into a 48-month contract with her mobile provider last month, under which she pays €40 a month for calls and data.
If she were making this decision based only on the financial considerations, what is the least Clare would need to earn in revenues in the first year of the new business? (ie what is the relevant cost?)
You are provided with the following information in relation to these materials.
Quantity in stock | Original Purchase price per unit | Replacement cost per unit | |
Material J | 60 | €10 | €11 |
Material K | 150 | €40 | €35 |
Material J is rarely used by Tipperary Limited and the company had been planning to scrap the 60 units it had on hand, as they were taking up space. They have no resale value.
Material K is used regularly in the business and the stock on hand has a resale value of €30.
Based on the above, the total relevant cost for this job of
Material J is: €
and Material K is: €
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