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A company uses two raw materials (Material A and B) to manufacture its single product. Thecustomer requirement, for this product, for the next period is 4500 units. The finished product containsby weight, 40% material A and 60% material B.The following further information is available:(i) The product is manufactured in batches of 50 units(ii) Material A costs £5 per kg(iii) Material B costs £2 per kg(iv) Material A wastage rate 20% (by weight)(v) Material B wastage rate 25% (by weight)(vi) Product rejection rate 10%(vii) Finished weight of completed unit 5kg(viii) Material wastage of products A and B are sold backto the original supplier at the rate of £4 per kg and£1 per kg respectively(ix) Product rejects are sold at £3 per kg(x) Direct labour £400 per batch(xi) Variable overheads £100 per batch(xii) Fixed overheads £32,500 per period(xiii) Selling price £50 per unit(xiv) No stocks of finished products or raw materials are kept
(a) Explain the difference between material wastage and product rejection.
(4 marks)(b) Calculate for the next period:(i) number of batches to be manufactured(ii) weight of material A and material B to be used(iii) income generated from the sale of material waste and product rejects.(10 marks)(c) Prepare a manufacturing profit and loss statement, in marginal costing format, for the next period.(6 marks)
(Total 20 marks)