Question

Q.1

Amben LTD, makes a product, the Arigato, which has the following unit costs: Direct materials $8, Direct labour cost $4, variable production cost $2. The company has fixed selling price at $30 per unit. At the beginning of September 2020, there were no opening inventories and production during the month was 20,000 units. Fixed costs for the month were $45,000 (production administration, sales, and distribution). There were no variable marketing costs.

Required

Calculate the contribution and profit for September 2020, using marginal costing principles, if sales were as follows.

(a)​10,000 Arigato​(b)20,000 Arigato (c) 15,000 Arigato

Q2

The following data relate to a manufacturing department for a period:

Budgeted data for the coming year are as follows:

Direct labour hours 60,000 hours

Machine hours 55,000 hours

Direct labour cost $110,000

Direct material cost $125,000

Production overhead $70,400

Actual data for the period are as follows:

Direct labour hours 55,500 hours

Machine hours 40,000

Direct labour cost $125,000

Direct material cost $150,000

Production overhead $67,800

Required:

(1) Calculate the production overhead absorption rate predetermined for the period based on :

i. Machine hours;

ii. Direct labour hours

(2) Two pieces of furniture are to be manufactured for customers. Direct costs are as follows:

Job 123​​​​​Job 124

Direct material​$15,400​​​​​$10,800

Direct labour​210 hours Dept. A​@$16/ hour:​160 hours Dept. A @20/hour

​​​120 hours Dept. B @$12/hour; 100 hours Dept. B @$18/hour

​​​100 hours Dept. C @$14/hour; 140 hours Dept. C@$10/hour

Selling and administrative overheads for each job are 10% of factory cost.

Required:

(b)​Calculate the total costs of each job using all the two bases in question (1) above.

(c) If the firm quotes prices to customers that reflect a required profit of 25 per cent on selling price, calculate the quoted selling price for each job.

Answer 1

SOLUTION

Question 1

Sales Quantity	10000	20000	15000
Sales (a)	300,000	600,000	450,000
Less: Variable cost
Direct Material	80,000	160,000	120,000
Direct Labour Cost	40,000	80,000	60,000
Variable production Cost	20,000	40,000	30,000
Total Variable Cost (b)	140,000	280,000	210,000
Contribution (c=a-b)	160,000	320,000	240,000
Less: Fixed Cost (d)	45,000	45,000	45,000
Profit (c-d)	115,000	275,000	195,000

** As per HOMEWORKLIB RULES, I have answered first question.