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Question 1 A) Marginal costing approach Profit statement for the last six months showing contribution and overall

profit Wardrobe (£000) 340 100 63 17 7 187 153 60 93 Dressing table (£000) 200 96 48 16 5.6 165.6 34.4 70 -35.6 Chest drawer (£000) 300 90 53 15 7 165 135 68 67 Totals (£000) 840 286 164 48 19.6 517.6 322.4 198 124.4 60.4 64

Sales revenue Variable costs Direct materials Direct labor Workshop Overheads Delivery costs Total variable costs Contribution Fixed costs Workshop Overheads Gross profit Selling costs Net profit

Contribution per unit £765 Workings Delivery costs for the products Wardrobes Dressing tables Chest drawers 160

£215

£675

B) Profit statement without dressing tables Wardrobe (£000) 340 100 63 17 Chest drawer (£000) 300 90 53 15 Totals (£000) 640 190 116 32

Sales revenue Variable costs Direct materials Direct labor Workshop Overheads

6 Delivery costs for the products Wardrobes Dressing tables Chest drawers 160 D) Contribution of dressing tables if mirror section had not been sub-contracted Dressing tables (£000) Sales revenue Variable costs Direct materials Direct labor Workshop Overheads Delivery costs Total variable costs Contribution Contribution per unit Workings 200 83.000) .2 54.4 37.6 162.000 (32.4 29.6 £235 1.4 19.2 5. Direct materials Original Less subcontracted part 96.Delivery costs Fixed costs Workshop Overheads Total Manufacturing costs Gross profit Selling costs Net profit Workings 7 95 282 58 7 103 268 32 14 198 550 90 -60.

400 54.200 19.200 83.000 3.In house manufacture material Totals 19. Variable overheads Original Increase due to mirror production Totals 16.400 3.200 Question 4 a) Production schedule on the production that maximizes profit given the available stock of mahogany Products Maximum demand Materials per unit Total material Requirement Materials available Shortfall Wardrobes 220 10 2200 Dressing tables Chest drawers Totals 176 220 5 5 880 1100 4180 3250 930 Products Contribution per unit Dressing Wardrobes tables 765 Chest drawers Totals 235 675 .000 6. Labor Original usage Manufacture of mirror Totals 48.200 2.

5 =47 Chest drawers =135 2. Contribution per unit of material Wardrobes Dressing table =76.5 2 2200 168300 47 3 250 11750 135 1 1100 148500 328550 198000 60400 70150 1.Contribution per unit of material Product rank Material utilization Contribution earned from products Fixed costs Workshop overheads selling costs Net profit Workings 76. Contribution earned from products Wardrobes Dressing tables Chest drawers a) Difference in profits between the expected profit if production would have been normal and the one predicted in part (a) Dressing Wardrobes tables 220 176 765 235 168300 41360 Chest drawers 220 675 148500 Products Demand Contribution per unit Contribution earned from products Fixed costs Workshop overheads Selling costs Totals 358160 198000 60400 .

Net profit Difference in profits 99760 – 70150 = 29.610 Workings Contribution earned per unit of product Wardrobes Dressing tables Chest drawers 99760 .