Question 2 Sol Ltd is a bed manufacturer which specializes in manufacturing their "Comfy" range of mattresses and "Soft" range of pillows. The company has two Production departments (Assembly and Finishing) and one Service department (Packing). The budgeted sales and production costs of the Comfy mattress and Soft pillow products range is given below: Details of budgeted fixed manufacturing overheads for the year ending 3131 December 2022 are shown below. Details of each department are as follows: The Packing department spends 30% of its time servicing the Assembly department and 70% of its time servicing the Finishing department. Continued ... Question 2 continued Required Ga) Prepare an Overhead Analysis Sheet for Sol Lid for the year ending 31st December 2022 and calculate the total overheads of the two Production departments. Provide justifications in support of your choice of apportionment bases. (8 marks) () Calculate the Fixed Overhead Absorption Rates for Assembly and Finishing Departments (rounded up to the nearest decimal point) assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours. (3 marks) (c) Calculate the Total Absorption Costs (assuming that the fixed manulacturing overheads are absorbed on the basis of labour hours ) for producing: in 1 unit of Comfy mattress (4 marks) -4) 1 unit of Soft pillow (4 marks) (8 marks) The Packing department spends 30% of its time servicing the Assembly department and 70% of its time servicing the Finishing department. Continued ... Question 2 continued Required (a) Prepare an Overhead Analysis Sheet for Sol Ltd for the year ending 31st December 2022 and calculate the total overheads of the two Production departments. Provide justifications in support of your choice of apportionment bases. (8 marks) (b) Calculate the Fixed Overhead Absorption Rates for Assembly and Finishing Departments (rounded up to the nearest decimal point) assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours. (3 marks) (c) Calculate the Total Absorption Costs (assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours ) for producing: 7) 1 unit of Comfy mattress (4 marks) a) 1 unit of Soft pillow (4 marks) (8 marks) (d) Mars plc has approached Sol Ltd with a proposal to purchase 2,000 units of assembled but unfinished Comfy mattresses (after the Assembly stage and before the Finishing stage). Mars plc intends to finish the assembled mattresses and brand them into its own "Luxury" mattress product range. Mars ple submits an offer to Sol Ltd of 320 per unit of unfinished Comfy mattresses. Taking into account both financial and non-financial factors, should Sol Ltd accept the offer? Provide calculations and justifications in support of your answer where necessary. (6 marks) Question 2 Sol Ltd is a bed manufacturer which specializes in manufacturing their "Comfy" range of mattresses and "Soft" range of pillows. The company has two Production departments (Assembly and Finishing) and one Service department (Packing). The budgeted sales and production costs of the Comfy mattress and Soft pillow products range is given below: Details of budgeted fixed manufacturing overheads for the year ending 3131 December 2022 are shown below. Details of each department are as follows: The Packing department spends 30% of its time servicing the Assembly department and 70% of its time servicing the Finishing department. Continued ... Question 2 continued Required Ga) Prepare an Overhead Analysis Sheet for Sol Lid for the year ending 31st December 2022 and calculate the total overheads of the two Production departments. Provide justifications in support of your choice of apportionment bases. (8 marks) () Calculate the Fixed Overhead Absorption Rates for Assembly and Finishing Departments (rounded up to the nearest decimal point) assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours. (3 marks) (c) Calculate the Total Absorption Costs (assuming that the fixed manulacturing overheads are absorbed on the basis of labour hours ) for producing: in 1 unit of Comfy mattress (4 marks) -4) 1 unit of Soft pillow (4 marks) (8 marks) The Packing department spends 30% of its time servicing the Assembly department and 70% of its time servicing the Finishing department. Continued ... Question 2 continued Required (a) Prepare an Overhead Analysis Sheet for Sol Ltd for the year ending 31st December 2022 and calculate the total overheads of the two Production departments. Provide justifications in support of your choice of apportionment bases. (8 marks) (b) Calculate the Fixed Overhead Absorption Rates for Assembly and Finishing Departments (rounded up to the nearest decimal point) assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours. (3 marks) (c) Calculate the Total Absorption Costs (assuming that the fixed manufacturing overheads are absorbed on the basis of labour hours ) for producing: 7) 1 unit of Comfy mattress (4 marks) a) 1 unit of Soft pillow (4 marks) (8 marks) (d) Mars plc has approached Sol Ltd with a proposal to purchase 2,000 units of assembled but unfinished Comfy mattresses (after the Assembly stage and before the Finishing stage). Mars plc intends to finish the assembled mattresses and brand them into its own "Luxury" mattress product range. Mars ple submits an offer to Sol Ltd of 320 per unit of unfinished Comfy mattresses. Taking into account both financial and non-financial factors, should Sol Ltd accept the offer? Provide calculations and justifications in support of your answer where necessary. (6 marks)
