Question:

Newton ltd manufactures two products

Product 1Product 2

Sales in Units3,0004,500

Opening inventory is expected to be:

Product 1500 units

Product 2700 units

Management have stated their desire to reduce inventory levels and closing inventory budgeted as:

Product 1200 units

Product 2300 units

Two types of material are used in varying amounts in the manufacture of the two products. Material requirements are shown below:

Product 1Product 2

Material M12kg3kg

Material M23kg3kg

The opening inventory of material is expected to be:

Material M14,300kg

Material M23,700kg

Management are keen to reduce inventory levels for materials levels for materials, and closing inventory levels are to be much lower. Expected levels are shown below:

Hours per unitProduct 1Product 2

Skilled labour31

Semi-skilled labour44

Skilled labour is to be paid at the rate of $9/hour and semi-skilled labour at the rate of $6/hour

Production overheads per labour hour are as follows:

Variable $3.50 per labour hour

Fixed $5.50 per labour hour

Calculate the following:

a.) The number of units of product 1 to be produced

b.) The number of units of product 2 to be produced

c.) The quantity of material M1 to be used

d.) The quantity of material M2 to be used

e.) The quantity of material M1 to be purchased and the value of the purchases

f.) The quantity of material M2 to be purchased and the value of the purchases

g.) The number of hours of skilled labour and the cost of this labour

h.) The number of hours of semi-skilled labour and the cost of this labour

i.) The total overhead budget