Question 1 Premier Rotisserie Ltd. is the manufacturer of a renowned 'Vanilla' cupcakes maker, which retails at $199. Premier Rotisserie sells to wholesalers at $145 per unit. The prime cost structure of the cupcake maker is as follows: Direct materials Direct labor Prime cost Per unit (S) 37.00 24.00 61.00 For the year ending December 31, 2021, the finance director of the company estimates that production overheads will be incurred totalling $312,390. She plans to use an overhead recovery rate based on generated budgeted machine hours. The budget machine hours are 17,355 hours for the year, and each unit produced uses up to 1.5 machine hours. Administrative and selling cost budgets have been prepared and the directors have recently decided on the sales forecasts for the coming year. The forecasts for the first 3 months are as follows: 610 Sales forecasts Administrative Months (units) and selling costs January 620 18,400 February 19,250 March 640 18,900 Required: a) Calculate a budget overhead recovery rate for use by the company during 2021. (8 marks) b) Prepare a budgeted profit and loss account for each of the 3 months, January to March 2022. Saline Waitrose Ltd. produces 2 products, Product X and Product Y. till now, it. The company has adopted the traditional absorption costing methods in transferring production overheads via an overhead absorption rate based on direct labour hours. The company's general director has recently read an article about activity-based costing (ABC), a revolutionary costing technique. He asks the finance director to organize a comparison by applying the ABC costing for a month. To do this, the finance director must present a detailed ABC costing technique and how this is done for Products X and Y. Five main activity bases of the factory operations were identified as follows: Machining Finishing Materials ordering Materials issued to production Scheduling, control, and quality testing of production During November 2021, the Saline Waitrose produces 2,000 units of Product X and Product Y. it incurs the following indirect production overhead costs: $ Factory deaning Power Factory rental Factory insurance Supervisory salaties Canteen charges Machinery depreciation Machinery maintenance Production consumables Other indirect labor costs Other factory costs Total 2,000 16,000 23,000 5,000 12.000 3.000 21,000 5,000 6,000 12,000 8.000 113,000 Praded 1 2.000 2.000 16 47 Produkty 1000 1000 The fundamental cost driver for each activity, together with quantities is established as follows: Cost driver M F M Numero del producten Number of de S. Required: a) Show all calculations for the total overhead absorbed based on the activity-based costing (ABC) approach for Product X and Product Y 2000 5.000 25 25 3 5 45.000 25.000 4.000 12.000 27.000 111.000 20 54 (10 marks) b) Determine the production cost per unit of Product X and Product Y based on the ABC approach. a) Company ABC's annual sales were $100,000, its variable costs $40,000 and its fixed costs $50,000. Calculate the profit for the year using the marginal cost equation. (5 marks) b) You as the finance director of your company were presented by your manufacturing director the following information: Product X(S) Y($) z($) Total($) Sales 5,500 50,000 42,000 97,500 Less: Variable cost 4,000 35,000 25,700 64,700 Contribution 1,500 15,000 16,300 32,800 Less: Fixed cost 11,000 Profit 21,800 Additional information: Assume that your company first began manufacturing and selling Product X which was then followed by Product Y and Product Z. Its fixed costs remained constant at $10,000, irrespective of the variability of its production. Required: Prepare a profit/volume chart showing the impact on its profit/ (loss) of the individual product ranges. (10 marks)
