Problem:
Hoi Poloi plc makes 3 types of filing cabinet,four- drawer, three drawer and two drawer.
The business uses general purposde machines which are equally suitable to be used in the manufacture of all three products.
Data for the year ended 30 April 2005 was as follows :
|
|
four drawer |
three drawer |
two drawer |
|
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
| Total sales |
410 400 |
|
123 900 |
|
427 500 |
| Total variable costs |
304 000 |
|
88 500 |
|
285 000 |
| Allocated fixed costs |
98 000 |
|
48 000 |
|
135 000 |
| Profit(loss) |
8400 |
|
(12 600) |
|
7 500 |
It had been proposed that the three-drawer cabinet be discontinued,as it was making a loss.
(a) State whether this proposal should have been agree,giving your reasons.
Sales and cost data for the year ended 30 April 2006 were as follows :
|
|
|
four- drawer |
three-drawer |
two-drawer |
|
|
|
|
|
|
|
|
| Sales in units |
|
15 000 |
|
6 000 |
|
30 000 |
|
|
|
|
|
|
|
|
| Raw materials |
|
$12 |
|
$8 |
|
$4 |
| Variable overheads |
|
$3 |
|
$2 |
|
$2 |
| Unit contribution |
|
$7 |
|
$6 |
|
$5 |
|
|
|
|
|
|
|
|
| Machine hours per unit |
0. 5 |
|
0. 5 |
|
0 .4 |
|
|
|
|
|
|
|
|
| Machine operators are paid $ 10 per hour. |
|
|
|
|
| Allocation of fixed costs |
$ 98 000 |
|
$ 48 000 |
|
$ 135 000 |
Required :
(b) calculate the selling price per unit for each product.
(c) calculate for each product the break-even point in both units and sales value.
(d) calculate for each product the profit or loss for the year ended 30 April 2006.
To try to improve profits for the year ending 30 April 2007,it has been suggested that a better quality,more easily worked, raw material be purchased. This would increase the cost of raw materials by five percent (5 %) but would offer savings fo ten percent (10 %) on loabour. Sales and other costs would remain unchanged.
(e) calculate for each product and in total the profit ot loss if this suggestion is put into effect.