Two products sold by TakeItAll, called Alpha and Beta, are manufactured in$-$house at

a company owned manufacturing facility in Durban. The manufacturing facility

operates a five$-$day work week for both production and sales. $($Transfers to the retail

division are regarded as sales of the manufacturing division$).$ Both Alpha and Beta

use the same material and labour, but Beta requires more labour and materials than

Alpha. The manufacturing facility divides its year into five$-$week periods for budgetary

purposes.

It is your responsibility as the management accountant to prepare budgets for the

manufacture of Alpha and Beta. You are given the following information to help you prepare

the production and resource budgets for period $8.$

Period $8$ : $25$ days

Sales forecast : alpha$-8460$ units and Beta$-9025$ units.

Period $9$: $25$ days

Sales forecast: alpha $-10575$ units and beta$-12636$ units.

Finished inventories:

There will be $1692$ units of Alpha and $3610$ units Beta in finished inventory at the

beginning of Period $8.$

The Period $8$ closing inventory of both Alpha and Beta depends on the forecast sales

in period $9.$

Period $8$s closing inventory of Alpha must equal $5$ days sales of Alpha in period $9.$

Period $8$s closing inventory of Beta must equal $10$ days sales of Beta in period $9.$

The FIFO inventory valuation method is used to value closing inventory.

Production and failure rates:

$10\%$ of Alpha finished production and $5\%$ of Beta finished production is faulty and

has to be destroyed. This faulty production has no value.

The faulty production arises from the production technology and is only discovered

on completion. The cost of faulty production is part of the cost of producing faultfree

Alphas and Betas.

Materials:

Each Alpha produced requires $20$ kg of materials and each Beta produced requires $40$

kg of materials.

The opening inventory of materials at the beginning of period $8$ is $64800$ kg$.$

The closing inventory of materials at the end of period $8$ must be $52600$ kg$.$

The material costs $50$c per kilogram.

Labour:

Each Alpha produced requires two labour hours and each Beta produced requires

three labour hours.

The manufacturing division employs $300$ production staff who work $35$ hours per

five$-$day week.

The hourly rate per employee is R$10$ and if any overtime is required the overtime

premium is R$3$ per employee per hour of overtime.

Any overtime premium is charged to factory overheads.

Factory overheads:

Budgeted overheads are charged to production on the basis of labour hours.

For Alpha, the budgeted factory overheads are R$62$ per labour hour. For Beta, they are R$58$

per labour hour.

Question $1$: Production budgets for Alpha and Beta.

Question $2$: Material purchases budget in kilograms and R$.$

Question$3$:Budgeted labour hours to be worked, including any

overtime hours.

Question $4$: Labour cost budget.

Question $5$:Total $($full$)$ cost of production budget for Alpha and Beta.

Question $6$:Full cost of GOOD production per unit for Alpha and Beta.

Question $7$:The sales director has just informed you that the Alpha sales in

Period $8$ will be $2000$ units more than originally forecast. You are

told the following:

$$ Production employees can work up to a maximum of $5000$

overtime hours in any five$-$week period.

$$ The material used in Alpha and Beta production can only be

made by one company and TakeItAll is the only user of the

material. Currently there is a shortage of the material and

the maximum additional material that can be obtained is $34$

$000$ kilograms.

$$ The demand for Beta in Period $8$ will remain at $9025$ units.

$7\mathrm{.}1)$ Prepare calculations to show whether it is the material or

labour hours that limits the extra production of Alpha in

period $8.$

$7\mathrm{.}2)$ Prepare a revised production budget in units for Alphas in

Period $8.$

$7\mathrm{.}3)$ Calculate the shortfall in the planned extra sales of Alpha

caused by the limit in extra production.

$7\mathrm{.}4)$ Suggest three ways how this shortfall may be overcome.