Question Two

Babybox Ltd in Newcastle is a manufacturer of organic stock cubes especially made for consumption by babies from the age of 1 year. For each box of cubes, they charge 7.50. Normal demand is projected to be 100,000 boxes per year. The material cost per box is 2.68, and the labour cost is 6 per labour hour. It takes 30 minutes to produce one box of cubes.

Fixed production overheads are 30,000 per annum, and fixed administration costs are 105 per month.

There are also some variable overheads which total 0.40 per box. These variable overheads can be split as55% production-related overheadsand45% selling overheads, the latter incurred at the point of sale.

Production of the cubes is constant all year round, but Babybox Ltd learned that there is a higher demand in the first half of the year. This is reflected in their planned production schedule as stated below:

Jul 1 - Dec 31, 2021 Jan 1 - June 30, 2022 Boxes sold 60,000 68,000 Boxes produced 75,000 50,000