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Part A: Jassie Ltd manufactures two types of baby cots, Jasmin and Cassie, and currently applies overhead on the basis of direct labour hours. Information
Part A: Jassie Ltd manufactures two types of baby cots, Jasmin and Cassie, and currently applies overhead on the basis of direct labour hours. Information about the companys products and budgets: Jasmin Cassie Estimated Product Volume 2,000 units Estimated Product Volume 3,000 units Direct Material Cost $ 45.00 per unit Direct Material Cost $ 60.00 per unit Direct Labour Per Unit 3.00 hours $22 p/hr Direct Labour Per Unit 4.00 hours $22 p/hr Jassies overhead of $1,000,000 can be identified with three major activities: Budget Overheads Order Processing $ 250,000 Machine Processing $ 660,000 Product Inspection $ 90,000 Total $ 1,000,000 Budget Direct Labour Hours 18,000 These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Actual data relevant to these activities follow: Profit has been decreasing, despite a significant factory upgrade with new, highly automated equipment being installed, which was expected to produce significant operating efficiencies. Required: 1 Currently direct labour hours are used to apply overhead to production, calculate the unit manufacturing costs of the Jasmin and Cassie cots if the expected manufacturing volume is attained. [8 marks]
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