monthly sales increase by Rs 80,000 and there is no change in fixe how much would you expect monthly net operating income to increase? (g) Next year the selling price of the product increases by 20%, variable cost increases by 10% and fixed cost increases by Rs 10,000. How much sales (in Rs) company will need to earn a profit of Rs 50,0007 [2+2+3+3+2+3+5-20] 3. Trimake Limited makes three main products (X, Y and Z), using broadly the same production methods and equipment for each. A conventional product costing system is used at present, although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Inputs Per Unit Volume Labour Hours Machine Hours Material Cost (Rs) Units Product X 36 1% 200 750 Product Y 19 120 1,250 Product Z 3 250 7,000 Direct labour costs Rs 140 per hour. Production overheads are absorbed on a machine hour basis. The normal overhead allocation rate for the period is Rs 280 per machine hour. Required: (a) You are required to calculate the cost per unit for each product using conventional methods. (b) What are total budgeted production overheads for the period? Further analysis shows that the total of production overheads (as calculated in above (b)), can be divided as follows: Costs relating to setups Costs relating to machinery Costs relating to materials handling Costs relating to inspection % 35 20 15 30 100% Total production overhead The following activity volumes are associated with the product line for the period as a whole. Total activities for the period: Number of Number of material Product X Product Y Product Z setups 75 115 480 670 moments Number of inspections 12 150 21 180 87 670 120 1,000 (c) Calculate the cost per unit for each product using ABC principles (select appropriate cost deriver for each activity). (d) Comment on the reasons for any differences in the costs in your answers to (a) and (b). 17+4+15+4-30) 4. Andrews and Co. Ltd has been invited to tender for a contract. It is to produce 10,000 metres of an electrical cable in which the business specialises. The estimating department of the business has produced the following information relating to the contract: Materials: The cable will require a steel core, which the business buys in. The steel core is to be coated with a special plastic, also bought in, using a special process. Plastic for the covering will be required at the rate of 0.10 kg/metre of completed cable. Direct labour. Skilled: 10 minutes/metre Unskilled: 2 minutes/metre The business already holds sufficient of each of the materials required to complete the contract Information on the cost of the inventories is as follows: