Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Short term decision making Shot plc manufactures three types of furniture products - chairs, stools and tables. The budgeted unit cost and resource requirements of

Short term decision making Shot plc manufactures three types of furniture products - chairs, stools and tables. The budgeted unit cost and resource requirements of each of these items are detailed below: Chair Stools Table ($) ($) ($) Timber cost 5.00 15.00 10.00 Direct labour cost 4.00 10.00 8.00 Variable overhead cost 3.00 7.50 6.00 Fixed overhead cost 4.50 11.25 9.00 16.50 43.75 33.00 Budgeted volumes 4,000 2,000 1,500 per annum ICLBAT/JANUARY2019 6 These volumes are believed to equal the market demand for these products. The fixed overhead costs are attributed to the three products on the basis of direct labour hours. The labour rate is $4.00 per hour. The cost of timber is $2.00 per square metre. The products are made from a specialist timber. A memo from the purchasing manager advises you that because of a problem with the supplier it is to be assumed that this specialist timber is limited in supply to 20,000 square metres per annum. The sales director has already accepted an order for 500 chairs, 100 stools and 150 tables, which if not supplied would incur a financial penalty of $2,000. These quantities are included in the market demand estimates above. The selling prices per unit of the three products are: - Chair $20.00 Stool $50.00 Table $40.00 Required: (a) Determine the optimum production plan and state the net profit that this should yield per annum. (13 marks) (b) Discuss one qualitative factor that you should consider (especially in the long term) in your decision in part (a). (2 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sarbanes Oxley And The New Internal Auditing Rules

Authors: Robert R. Moeller

1st Edition

0471483060, 978-0471483069

More Books

Students also viewed these Accounting questions

Question

9. Describe the characteristics of power.

Answered: 1 week ago

Question

3. Identify and describe nine cultural value orientations.

Answered: 1 week ago