Problem: Passabuck Ltd makes three products:meenibuck,teenibuck and dleuxibuk for which the folloing details are given
| Product Meenibuck |
Teenibuck Deluxibuck |
| Direct material (kilos per unit) |
5 |
|
7 |
|
10 |
| Direct labour (hours per unit) |
4 |
|
6 |
|
8 |
| Direct expenses(per unit) |
$7 |
|
$4 |
|
$9 |
| Selling price per unit |
|
$74 |
|
$85 |
|
$115 |
Further information:
1. All three products are made from material X.
2. Material X costs $ 3 per kilo.
3. All three products require the same type of labour which is paid at $7 per hour.
4. Total fixed costs amount to $70 000
5. Budgeted production (based upon maximum demand) is:
Meenibuck
|
|
2000 units |
| Teenibuck |
|
2400 units |
| Deluxibuck |
1800 units |
It has now been discovered that the supply of material X is limited to 38 000 Kilos.
Required:
a) Calcualte the contribution per kilo of material X used for each product.
b) Prepare a productio budget based on your calculation in (a) to give maximum profit from the material available.
c) Calculate the following variances:
1) Total direct material variance
2) Total direct labour variance
3) Total direct expenses Variance
4) Sales volume Variance
Using the variances calculated in (c) prepare an accounting statement reconciling the profit which would have been obtained from the original budget and the profit expected from the budget in (b).