ANSWER THE FOLLOWING

1. In addition to producing leather footballs, the company is considering producing three types of running
shoes, products Exe, Wye and Zed. Expected monthly costs and sales information for each product are as
follows:

Product Exe Wye Zed

Sales and production units 2,000 3,000 5,000

Labour hours per month 1,000 1,200 2,000
Unit selling price [$] 30.00 25.00 20.00
Unit material cost [$] 10.00 8.00 6.00
Unit direct labour cost [$] 2.50 2.00 2.00
Unit contribution [$] 17.50 15.00 12.00

The total expected monthly fixed costs relating to the production of running shoes are $ 32,000.

Complete the table below to calculate the forecast total contribution and profit for the company from the
sale and production of running shoes.

ADDITIONAL DATA

For this task, assume the company only manufactures product Exe. It does not manufacture products Wye
and Zed.

(a) Complete the table below for both production volumes.

(b) Calculate the number of units of product Exe that the company would need to make and sell each
month to make a profit of $ 2,000.

ADDITIONAL DATA

For each of the next three months, the Production Director estimates that there is a maximum of 3,000
direct labour hours available for the production of running shoes.

(a) Complete the table below.

(b) Calculate how many units of products Exe, Wye and Zed the company should make and sell each month
to maximise its profits using 3,000 labour hours.

2. The following information relates to the manufacture of batches of microwave containers during the
month of September 2005.

Direct materials per batch $ 220.80

Direct labour per batch $ 386.40
Total variable overheads $ 89,900
Total fixed overheads $ 130,200
Number of batches produced 620

Calculate the cost per batch of microwave containers under:

(a) Variable (marginal) costing

(b) Full absorption costing

MARKING SCHEME

2.