Problem: Orange Ltd produce four types of lamps Platinum, Gold, Silver,and Bronze. Unit selling prices and cost are as follows.
| Products |
|
|
Platinum |
Gold |
Silver |
Bronze |
|
|
|
$ |
$ |
$ |
$ |
| Selling price |
|
184 |
148 |
142 |
138 |
|
|
|
|
|
|
|
| Cost |
|
|
|
|
|
|
|
Direct Materials |
24 |
21 |
30 |
18 |
|
Direct Labour |
30 |
27 |
24 |
27 |
|
Over heads |
30 |
25 |
20 |
25 |
Direct Material and Direct labour are variable costs.
Overheads are 40% variable and 60% fixed
Orange Ltd intention was to produce and sell the followig quantities during the year ended 31 May 2005.
| Product |
|
Quantity |
|
|
(units) |
| Platinum |
|
2000 |
| Gold |
|
1800 |
| Silver |
|
1600 |
| Bronze |
|
2400 |
Required
a. A statement in marginal costing format of profitability for each product and in total.
It was then discovered that fixed overhead were likely to rise by 8% and the totalamount available to pay overheads could not be increased.
Required:
b. A statement taking into account the possibility of the increase in fixed overheads and maximising profit, showing the quantity of each product to be produced.
c. A Statement in marginal costing format of profitability for each product and in total based on yours answer to (b).