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

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