4. Cost and management accounting (A Level)
A section of Accounting, 9706
Listing 10 of 174 questions
S Limited manufactures three different products. The following budgeted information is available: Products A B C $ $ $ Monthly sales revenue 72 000 27 000 165 000 Unit costs Direct materials ($1 per kilo) Direct labour Variable overheads Selling price per unit Total monthly fixed overheads are expected to be $138 000. The directors of S Limited have been informed that only $39 000 worth of direct materials would be available in December 2017. All products use the same type of direct material and no price increase would occur due to the shortage. No changes are anticipated in selling prices, fixed overheads or unit variable costs. Due to an increased demand, the directors do not want to discontinue any of the products and wish to produce a minimum of 1000 units of each. REQUIRED Prepare a statement to show the maximum budgeted profit the company will make in December 2017 taking into account the shortage in materials and minimum production requirement. Product A Product B Product C Contribution per unit ($) Contribution per limiting factor ($) Ranking Budgeted profit statement for December 2017 Production Contribution per unit $ Total $ Product A Product B Product C Total contribution Less: Fixed overheads Budgeted profit / loss Prepare a statement to show the maximum budgeted profit the company will make in December 2017 taking into account the shortage in materials but without the minimum production requirement. Budgeted profit statement for December 2017 Production Contribution per unit $ Total $ Product A Product B Product C Total contribution Less: Fixed overheads Budgeted profit / loss Advise the directors of S Limited whether or not they should produce a minimum of 1000 units of each product. Justify your answer. Define the term ‘margin of safety’. Explain the usefulness of margin of safety to a company.
9706_w17_qp_23
THEORY
2017
Paper 2, Variant 3
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Questions Discovered
174