Costing
Scomat Ltd is a producer of hand wash and hand sanitizer. Monthly production capacity of the company amounts to 200, 000 units of hand wash and 100, 000 units of hand sanitizer. Given below is information about each product: Hand wash Hand sanitizer Direct materials per unit (Rs) 22 15 Direct labour per unit (Rs) 10 10 Variable overheads per unit (Rs) 9 7 Selling price (Rs) 50 75 Allocated fixed costs 460,000 560,000 Fixed costs per month amount to Rs 1,020,000. The company is currently operating at 80% of its capacity for both products. REQUIRED: a) Calculate the company’s overall contribution and profit for the month when it is operating at 80% capacity. [8 marks] Due to the unexpected outbreak of the pandemic, there has been a surge in the demand for the company’s hand sanitizers. As a result, the company’s director decided to concentrate all its effort in the production of hand sanitizers only and drop the production of hand wash
Discuss whether it is justified to drop the production of hand wash? You can support your answer with figures. [6 marks] Having decided to drop production of hand wash after one month, Scomat Ltd is now a producer of hand sanitizers only. The company is currently operating at 100% capacity and has been asked to tender a price to supply an additional 50, 000 units of hand sanitizer monthly. The production manager has informed the director that if monthly production is to exceed capacity, the following additional costs would be incurred: i. Two additional machines will have to be rented at Rs 600,000 per month each. ii. Fixed distribution costs will increase by Rs 12,000 per month. iii. Labour force will have to work overtime and be paid an additional premium of 20% on any excess capacity. REQUIRED: c) Calculate the company’s total contribution and profit for the month if the special order is tendered at the actual selling price for hand sanitizer. [8 marks] d) Calculate the price which the company should quote for the special order so that it would achieve an overall profit of Rs 5,118,000. [4 marks] e) Discuss two important factors that Scomat Ltd should take into account when considering whether or not to accept a special order?
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Costing
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KidSport Ltd produces cricket bats for kids that it sells for
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Costing
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KidSport Ltd produces cricket bats for kids that it sells for
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The costs of producing and selling 54 000 bats are as follows:
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