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Question 2 (20 marks) You are employed as the cost accountant of Athlone Civil Engineering (Pty) Ltd; and your company produces three types of building
Question 2 (20 marks) You are employed as the cost accountant of Athlone Civil Engineering (Pty) Ltd; and your company produces three types of building materials; Athlone-bricks, Athlone- floor tiles and Athlone-roof tiles. Athlone-bricks are usually bought by large-scale construction companies, Athlone-floor tiles and Athlone-roof tiles are bought by medium-sized construction companies. The demand for the three types of building products always exceeds your company's production capacity. Therefore, product mix decisions have to be made to determine the optimum production quantities for each product using the relevant costing strategy. The following information is provided: Athlone-bricks VC = R42 Athlone-floor tiles Athlone-roof VC= R60 tiles VC= R80 Materials cost R 20.00 R 30.00 R 50.00 Direct labour R 12.00 R 16.00 R 20.00 Variable overhead cost R 10.00 R 14.00 R 10.00 Fixed overhead cost R 8.00 R 8.00 R 5.00 Total unit costs R 50.00 R R68.00 R 85.00 Production volume and 60 000 30 000 25 000 sales Fixed overhead costs are allocated to products based on direct labour hours. Direct labour rate is 12.00 per hour. Materials cost R 10.00 per kg. Direct material are limited to 290 000kg per annum due to procurement logistics. Your marketing manager has accepted an order for 7 125 Athlone-bricks, 1 425 Athlone-floor tiles and 2 166 Athlone-roof tiles. If your company fails to fulfil any part of the order, it will be obliged to pay a penalty of R 30 500. 5 HMAC200-1-July-Dec2021-SA1-CTM-V.2-03082021 The selling prices for the three types of building products are given below: Unit sales Metro-bricks R 50.00 Metro-floor tiles R75.00 Metro-roof tiles R90.00 Required Calculate the following: 2.1 The available capacity for scarce materials 2.2 By how much the budgeted material exceed available capacity 2.3 The contribution per limiting factor (10 marks) (3 marks) (7 marks)
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