QUESTION TWO MCK Ltd is investigating the financial viability of a new product called Kimble. The Kimble is a short life product for which a market has been identified at an agreed design specification. The product will only have a life of 12 months. The following estimated information is available in respect of Kimble. (a) Sales should be 120,000 in the year in batches of 100 units. An average selling price of K1,150 per batch of 100 units is expected. All sales are for cash. (b) An 80% learning curve will apply for the first 700 batches after which a steady state production time will apply, with the labour time per batch after the first 700 batches equal the time for the 700th batch. The cost of the first batch was measured at K2,500. This was 500 hours. (c) Variable overhead is estimated at K2 per labour hour. (d) Direct material will be K500 per batch of Kimble for the first 200 batches produced. The second 200 batches will cost 90% of the cost per batch of the first 200 batches. All batche from then on will cost 90% of the batch cost for each of the second 200 batches. All purchases are made for cash. (e) Kimble will require additional space to be rented. These directly attributable fixed costs w be K15,000 per month. A target net cash flow of K120,000 is required in order for this project to be accepted. (i) The average time for the 700th batch is (ii) The total labour hours after the first 700 batches are (iii) The total labour hours for the whole 12 months are (iv)The total material cost is (v) The total labour cost for the 12 months of production is (4 Marks) (5 Marks) (4 Marks) (4 Marks) (4 Marks) (vi) The total net cashflow from the production of this product is (4 Marks)