Trading (production and sales):

You should assume that today is Monday 23^rd November 2020. Sales:

The company has the following sales orders to be delivered during December 2020.

Order / product:	Order 1101 Sky	Order 1102 Sun	Order 1103 Moon
Quantity to be delivered (sales in units)	650	950	1,150
Selling price (per unit)	90	35	55

Production:

The production schedule for December 2020 (product quantities and production resources requirement) is shown below.

Order / product:	Order 1101 Sky	Order 1102 Sun	Order 1103 Moon
Finished goods: Quantity to be produced	790	1,000	1,320
Note: At 1st December 2020 there will be no opening inventory of finished goods. Resources requirement for production: Direct costs (variable costs):
Order / product:	Order 1101 Sky	Order 1102 Sun	Order 1103 Moon
Machining department:				Totals
Incremental materials cost	1,440	720	1,150	3,310
Direct labour hours (total)	102	144	72	318 hours
Machine hours (total)	186	221	144	551 hours
Painting department:
Incremental materials cost	864	1,740	288	2,892
Direct labour hours (total)	144	114	90	348 hours
Machine hours (total)	114	60	30	204 hours
Assembly department:
Incremental materials cost	1,150	1,150	720	3,020
Direct labour hours (total)	216	258	204	678 hours
Machine hours (total)	60	72	102	234 hours

Fabien Ltd continued:

Fixed indirect production overheads:

Indirect production overheads are fixed (unaffected by production activity levels) at 41,500 per month. This value has been allocated and apportioned to the 3 production departments as follows:

Production department:	Machining	Painting	Assembly	Total
Fixed costs (allocation / apportionment)	19,400	8,600	13,500	41,500

Bases for absorption:

• Machining department = Machine hours
• Painting department = Direct labour hours
• Assembly department = Direct labour hours

Note:

The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above.

Required:

Task 2:

Prepare (for each product and in total) the following planned values for December 2020:

1. Prime costs

11 Marks

2. Total (full) costs of production

14 Marks

3. Finished goods closing inventories/cost of sales

7 Marks

4. Gross profits (and gross profit margins)

3 Marks

Note to task 2:

The requirement of task 2 should be established using an absorption costing system

(as described in the production process flowchart)

The total task 2 mark above, includes marks allocated to short descriptive notes to workings

(<=100 words)

These notes should be short explanatory notes that will serve to define the terminology used and explain the workings (and results / outcomes) to a colleague who does not work in the finance office