Question Triple Products plc manufacture and sell three engineering products, A, B, & C. The budget estimates for the month of March reveal that there is an expected net profit of 91,500, requiring sales as indicated in Table A below. The company holds no stocks of finished product. Table A Units to sell Average selling price per unit Product A 12,000 15.00 Product B 15,000 16.00 Product C 10,000 20.00 Selling Expenses and Administration costs associated with this sales programme are: Commissions payable at the rate of 10% of selling prices with additional fixed selling costs of 80,000. Administration costs for March are budgeted at 40,000. The management accountant who calculated the March budget forecast has employed absorption costing which showed that the cost per unit was: A 8.00 per unit B 9.00 per unit C 11.55 per unit The cost accountant who assisted the management accountant has provided the undernoted set of data in Table B: Table B Direct Labour cost per hour Products produced per hour Direct Materials Sets used in each product Variable Production Overhead Fixed Production Overhead Product A 12 3 0.30 per set 5 sets 1.50 per hour 6 per hour Product B 12 2.5 0.30 per set 4 sets 1.50 per hour 6 per hour Product C 12 2 0.30 per set 6 sets 1.50 per hour 6 per hour Both Variable and Fixed production overhead is charged to the products on the basis of the direct labour hours per unit. Fixed production overhead is 90,000 per calendar month. At a late stage in February, the production manager indicates that he has a problem satisfying the March sales programme as 10 engineers are going on an internal retraining course for the entire month and will not be available for normal production duties. In a four-week month, each engineer works a 3772 hour week. The departmental retraining costs (5,000) are included in the monthly production fixed costs, although no allowance is made for wages paid to engineers on the course. The sales manager thinks that he will have to discuss a revision to the production programme because (a) he has contractual commitments to supply minimum levels of products A and B to customers, whilst (b) he is minded to produce as many Product C as possible, (after reaching break even and satisfying the contractual commitments), as Product Cis the major profit earner according to the gross margin reports he has been given in previous months. The management accountant thinks that there may be some confusion in the sales manager's mind on break-even and profit earning potential. Although Triple Products plc prepares its accounts employing absorption costing, the management accountant believes that for decision purposes it may be better to re-present the March budget according to direct (or variable) costing and he invites the cost accountant to join him in reworking the March data. Contractual commitments are: A 9,000 units at 15.00 per unit B 11,000 units at 16.00 per unit REQUIRED: A Calculate the original March budget according to absorption costing (5 Marks) B Calculate from the original March budget data the contribution margins for products A,B & C (10 Marks) C Calculate the original March budget according to direct costing (10 Marks) Colauta thabeeration contrarredhet Question Triple Products plc manufacture and sell three engineering products, A, B, & C. The budget estimates for the month of March reveal that there is an expected net profit of 91,500, requiring sales as indicated in Table A below. The company holds no stocks of finished product. Table A Units to sell Average selling price per unit Product A 12,000 15.00 Product B 15,000 16.00 Product C 10,000 20.00 Selling Expenses and Administration costs associated with this sales programme are: Commissions payable at the rate of 10% of selling prices with additional fixed selling costs of 80,000. Administration costs for March are budgeted at 40,000. The management accountant who calculated the March budget forecast has employed absorption costing which showed that the cost per unit was: A 8.00 per unit B 9.00 per unit C 11.55 per unit The cost accountant who assisted the management accountant has provided the undernoted set of data in Table B: Table B Direct Labour cost per hour Products produced per hour Direct Materials Sets used in each product Variable Production Overhead Fixed Production Overhead Product A 12 3 0.30 per set 5 sets 1.50 per hour 6 per hour Product B 12 2.5 0.30 per set 4 sets 1.50 per hour 6 per hour Product C 12 2 0.30 per set 6 sets 1.50 per hour 6 per hour Both Variable and Fixed production overhead is charged to the products on the basis of the direct labour hours per unit. Fixed production overhead is 90,000 per calendar month. At a late stage in February, the production manager indicates that he has a problem satisfying the March sales programme as 10 engineers are going on an internal retraining course for the entire month and will not be available for normal production duties. In a four-week month, each engineer works a 3772 hour week. The departmental retraining costs (5,000) are included in the monthly production fixed costs, although no allowance is made for wages paid to engineers on the course. The sales manager thinks that he will have to discuss a revision to the production programme because (a) he has contractual commitments to supply minimum levels of products A and B to customers, whilst (b) he is minded to produce as many Product C as possible, (after reaching break even and satisfying the contractual commitments), as Product Cis the major profit earner according to the gross margin reports he has been given in previous months. The management accountant thinks that there may be some confusion in the sales manager's mind on break-even and profit earning potential. Although Triple Products plc prepares its accounts employing absorption costing, the management accountant believes that for decision purposes it may be better to re-present the March budget according to direct (or variable) costing and he invites the cost accountant to join him in reworking the March data. Contractual commitments are: A 9,000 units at 15.00 per unit B 11,000 units at 16.00 per unit REQUIRED: A Calculate the original March budget according to absorption costing (5 Marks) B Calculate from the original March budget data the contribution margins for products A,B & C (10 Marks) C Calculate the original March budget according to direct costing (10 Marks) Colauta thabeeration contrarredhet