Question 2

Ruggles Circuit Company manufactures circuit boards for other firms. Management is attempting to search for ways to reduce manufacturing labour costs and has received a proposal from a consulting company to rearrange the production floor next year. Using the information below regarding current operations and the new proposal, which of the following decisions should management accept (show workings)? (5 marks)

Currently Proposed

Required machine operators 5 4.5

Materials-handling workers 1.25 1.25

Employee average pay $8 per hour $9 per hour

Hours worked per employee 2,100 2,000

The following information is for Nicholas Inc. Selling Price $150 per unit Variable Cost $90 per unit Total Fixed Cost $300,000 i) How many units must be sold to reach a target income of $90,000? (3 marks) ii) If targeted income is $120,000 what must be the sales revenue? (4 marks) iii) Explain the concept of contribution margin ratio. (3 marks)

Under what circumstances should a company consider moving to an ABC costing system. (5 marks)