assignment two.docx - A Budgeted Income statement Sales units 16000 Sales 2240000 Assignment two Less Tasks one Expenses Material 1329600 Labor 604800

# assignment two.docx - A Budgeted Income statement Sales...

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Assignment two Tasks one C) the problem lies at 1 costlier material purchased of XX and it is poor utilization A) Budgeted Income statement: Sales units 16000 Sales 2240000 Less: Expenses: Material 1329600 Labor 604800 Overhead 86400 Total costs 2020800 NOI 219200 Income statement- marginal : sales unit 15400 Sales 2129050 Less: Expenses: Material 1389619 Labor 612766 Overhead 96840 Total costs 2099225 NOI 29825 b.) i) Material price variance = (12.75 - 12.25)98560 = 49280(U) Material price variance = (3.14 - 3.20)42350 = 2541(F) Material usage variance = (15400*6 - 98560)*12.25 = 75460(U) Material usage variance = (15400*3 - 42350)*3.20 = 12320(F)
2 higher labor paid and not efficiently utilized 3 higher overheads are paid 4 low selling price and lower sale Task two A) Product Nealy Tersa Pelta Total Variable Machining Cost per unit [A] 600 500 200
Variable Machining costs per hour [B] 200 200 200 No of machine hours per unit [A/B] 3 2.5 1 Estimated Demand 1800 4500 39000 Machine Hours [No of machine hours *demand] 5400 11250 39000 55650 B) Product Nealy Tersa Pelta Selling Price per unit 3000 2100 800 Less:Variable Costs Direct Material Cost 750 500 100 Variable Machining 600 500 200
Cost Sales Commision 150 105 80 Contribution 1500 995 420 c) Product Nealy Tersa Pelta Contribution [A] 1500 995 420 Machine Hour per unit [ B] 3 2.5 1 Contribution per machine hour [A/B] 500 398 420 Ranking 1 3 2 No of machine hours 5400 5600 39000 Most Profitable Production levels [No of machine hours/ machine hour per unit] 1800 2240 39000 Calculation of machine hours for Tersa =50,000- 39000 - 5400 = 5600 d) Martha along with maximizing the profits also has to consider the quality of the products and should not comprise on quality. Also, other qualitative factors are: 1. Effect of decision on employee morale, motivation 2. Decision on long term profitability 3. Decision of the company on company's public image

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• Spring '13
• Dr.NguyenPhan
• Economics, Direct material price variance