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JJ Company specializes in the manufacture and distribution of accessories for cars and motorcycles across central Lagos and the suburbs. The board and management of the company have decided to expand their potential market by capitalizing on the recent demand for pedal cycles caused by congestion and concerns for global warming. They intend to start manufacturing pedal cycles from 2019.
The design team has developed four models A, B, C, and D for the initial launch of the pedal cycle. The manufacturing process involves frame manufacturing and assembly/accessory fitting.
At present, there are 40 employees available to undertake frame manufacturing and 20 available for assembly and accessory fitting. Each employee works a 37-hour week, and no overtime is permitted. Employees working on frame manufacturing cost N1,100 per hour, while those working on assembly/accessory fitting cost N1,500 per hour. All employees can be fully utilized elsewhere if not working on this venture.
The anticipated time in hours that each process will take is as follows:
| Model | Frame Manufacturing (hours) | Assembly/Accessory Fitting (hours) |
|---|---|---|
| A | 2.25 | 1.25 |
| B | 2.20 | 1.80 |
| C | 2.20 | 1.40 |
| D | 2.60 | 3.00 |
Direct materials are expected to cost N5,500 for Model A, N6,000 for Models B and C, and N10,000 for Model D. There is no limit on the availability of materials.
Variable overheads of N2,700 per pedal cycle are incurred for both Models A and C, and N3,000 per pedal cycle for both Models B and D.
Fixed overheads allocated to the pedal cycle workshop are N666,000 per annum. The organization uses labor hours to base its overhead absorption rates.
Initial market research indicates that demand and selling prices are likely to be as follows:
| Model | Number of Pedal Cycles | Selling Price (N) |
|---|---|---|
| A | 200 | 14,550 |
| B | 75 | 16,500 |
| C | 220 | 17,000 |
| D | 80 | 24,000 |
In Year 2, two additional options are available:
a. Determine the production plan that would maximize the profit available to JJ Company in Year 1, assuming no overtime is worked. State the profit that would be earned as a result of this plan. (14 Marks)
b. Advise JJ Company of its most profitable course of action in Year 2, assuming all demand is to be satisfied. (8 Marks)
c. Explain in detail how the relationship between the company and the chosen supplier should be controlled if the directors are considering outsourcing key inputs. (8 Marks)
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The following data were extracted from the records of ABZ Limited for the month of July:
Calculate the capacity ratio:
A. 103%
B. 102.56%
C. 98%
D. 97.5%
E. 97%
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Smooth Sailing Ltd is a medium-sized company that specializes in the construction of iron gates for clients. It has three production departments through which all jobs are processed: Assembling, Welding, and Finishing. The following data relates to the year ended 30 September 2015:
Budgeted Data:
| Assembling | Welding | Finishing | |
|---|---|---|---|
| Overheads (GH¢) | 64,050 | 108,900 | 83,520 |
| Direct labour hours | – | – | 14,400 |
| Machine hours | 5,250 | 6,600 | – |
Job CA2 was undertaken during the last month of the year recording the following:
Direct materials:
Direct labour:
Machine hours:
Trials and testing cost of GH¢5,400 is incurred on each job.
It is company policy to make a mark-up of 50% of profit on each job.
Required:
i) Calculate an appropriate overhead absorption rate for each department for the year ended 30 September 2015. (5 marks)
ii) Determine the total costs, and hence, the price of Job CA2. (10 marks)
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Find Related Questions by Tags, levels, etc.
JJ Company specializes in the manufacture and distribution of accessories for cars and motorcycles across central Lagos and the suburbs. The board and management of the company have decided to expand their potential market by capitalizing on the recent demand for pedal cycles caused by congestion and concerns for global warming. They intend to start manufacturing pedal cycles from 2019.
The design team has developed four models A, B, C, and D for the initial launch of the pedal cycle. The manufacturing process involves frame manufacturing and assembly/accessory fitting.
At present, there are 40 employees available to undertake frame manufacturing and 20 available for assembly and accessory fitting. Each employee works a 37-hour week, and no overtime is permitted. Employees working on frame manufacturing cost N1,100 per hour, while those working on assembly/accessory fitting cost N1,500 per hour. All employees can be fully utilized elsewhere if not working on this venture.
The anticipated time in hours that each process will take is as follows:
| Model | Frame Manufacturing (hours) | Assembly/Accessory Fitting (hours) |
|---|---|---|
| A | 2.25 | 1.25 |
| B | 2.20 | 1.80 |
| C | 2.20 | 1.40 |
| D | 2.60 | 3.00 |
Direct materials are expected to cost N5,500 for Model A, N6,000 for Models B and C, and N10,000 for Model D. There is no limit on the availability of materials.
Variable overheads of N2,700 per pedal cycle are incurred for both Models A and C, and N3,000 per pedal cycle for both Models B and D.
Fixed overheads allocated to the pedal cycle workshop are N666,000 per annum. The organization uses labor hours to base its overhead absorption rates.
Initial market research indicates that demand and selling prices are likely to be as follows:
| Model | Number of Pedal Cycles | Selling Price (N) |
|---|---|---|
| A | 200 | 14,550 |
| B | 75 | 16,500 |
| C | 220 | 17,000 |
| D | 80 | 24,000 |
In Year 2, two additional options are available:
a. Determine the production plan that would maximize the profit available to JJ Company in Year 1, assuming no overtime is worked. State the profit that would be earned as a result of this plan. (14 Marks)
b. Advise JJ Company of its most profitable course of action in Year 2, assuming all demand is to be satisfied. (8 Marks)
c. Explain in detail how the relationship between the company and the chosen supplier should be controlled if the directors are considering outsourcing key inputs. (8 Marks)
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The following data were extracted from the records of ABZ Limited for the month of July:
Calculate the capacity ratio:
A. 103%
B. 102.56%
C. 98%
D. 97.5%
E. 97%
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Smooth Sailing Ltd is a medium-sized company that specializes in the construction of iron gates for clients. It has three production departments through which all jobs are processed: Assembling, Welding, and Finishing. The following data relates to the year ended 30 September 2015:
Budgeted Data:
| Assembling | Welding | Finishing | |
|---|---|---|---|
| Overheads (GH¢) | 64,050 | 108,900 | 83,520 |
| Direct labour hours | – | – | 14,400 |
| Machine hours | 5,250 | 6,600 | – |
Job CA2 was undertaken during the last month of the year recording the following:
Direct materials:
Direct labour:
Machine hours:
Trials and testing cost of GH¢5,400 is incurred on each job.
It is company policy to make a mark-up of 50% of profit on each job.
Required:
i) Calculate an appropriate overhead absorption rate for each department for the year ended 30 September 2015. (5 marks)
ii) Determine the total costs, and hence, the price of Job CA2. (10 marks)
Find Related Questions by Tags, levels, etc.
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