WOODPECKER (PTY) LTD

(a) Calculate the following variances for Woodpecker (Pty) Ltd’s old-style cupboards for the month ended 31 October 2021:
i) Sales volume variance
MARKS 8,0
ii) Sales price variance
iii) Direct material price variance for raw wood
i. Sales volume variance
Budgeted volume^ 30 000 units 0,5 R/W
less: Actual volume^ 28 000 units 0,5 R/W
x Standard contribution per unit^ R200 per unit 0,5 R/W
Sales volume variance (Adverse)^ R400 000 0,5 M
ii. Sales price variance
Actual selling price (given )^ R16 240 000 0,5 M
less: Standard selling price (R17 760 000^ / 30 000 units^ x 28 000 units^) R16 576 000 1,5 R/W
Alternative: [(R16 240 000 / 28 000u = R580) ^ - (R17 760 000 ^ / 30 000u ^ = R592)] x 28 000u ^
Sales price variance (Adverse)^ R336 000 0,5 M
ii. Direct material price variance
Actual price (given )^ R8 736 000 0,5 M
less: Standard price (R9 000 000^ / (30 000units^ x 1.5kgs^) x (28 000 units^ x 1.6kgs^) R8 960 000 2,5 R/W
Alternative: [(R8 736 000 / (28 000u x 1.6kgs) = R195) ^ - (R9 000 000 ^ / (30 000u ^ x 1.5kgs ^ )= R200)] x (1.6 ^ x 28 000u ^ )
Direct raw material price variance (Favourable)^ R224 000 0,5 M

(b) Calculate the total number of new-style cupboards Woodpecker (Pty) Ltd can build in the first two months of production. MARKS 4,0
Time taken by each worker for the first unit

Yx = a(X)^(log LC / log 2)
6.86 hours^ = a(8^)^(log 0.7 / log 2)^ [Alternative: (6.86 x 5 = 34.3hrs) = 5a x (8 )^ (log0.7 / log 2) ] 1,5 R/W
a = 20 hours [Note: May get a = 20.0011 hours if rounded log 0.7 and log 2 to 4

Time for 40th unit made by each worker

Time for 40 units = a(X)^(log LC / log 2) = (20^(40^)^(log 0.7 / log 2)^) x 40^ 119,8707 hours 2 M
(log LC / log 2) (log 0.7 / log 2) 118,4065 hours
Time for 39 units = a(X)^ = 20(39)^ ) x 39^ award for
0,5 M
using 39
Time for 40th unit 1,4642 hours
 1 worker
Total hours for 2 months (36 hours x 8 weeks) 288 hours 0,5 R/W
Less: Time for first 40 units -119,8707 hours 0,5 M
168,1293 hours

Units manufactured per worker after learning curve ends 114,8267 units 0,5 M
(168.1293hrs / 1.4642 hrs; 840.6467 hrs / 7.3209 hrs)

Round down ( NB: per worker ) 114 units 0,5 M

Add: First 40 units 40 units 0,5 R/W
154 units
x 5 workers 770 units 0,5 M
(c) Justify whether linear programming or contribution per limiting factor should be used to decide on the optimal mix of tables and chairs to be
MARKS 4,0
manufactured by Woodpecker (Pty) Ltd to maximise profits for the month ended 31 December 2021.
Contribution Tables Chairs
Selling price R3 096 R2 500
Less: Variable costs
- Wood (R500 x 3kg; 500 x 2kg) -R1 500 -R1 000
- Varnish (R200 x 1l; R200 x 0.5l)) -R200 -R100
- Nails (R1 x 20; R1 x 30) -R20 -R30
- Direct labour (R100 x 4hrs; R100 x 5hrs) -R400 -R500

- Machine cutting of wood (R80 x 0.5hrs; R80 x 0.25hrs) -R40 -R20

R936 R850
^ ^ 1 R/W
Contribution per limiting factor
Wood (R936 / 3kg); (R850 / 2kg) 312 425 0,5 M
Rank 2 1 0,5 M

Direct labour (R936 / 4hrs; R850 / 5 hours) 234 170

0,5 M
Rank 1 2 0,5 M

Conclusion:
As there are conflicting rankings for the contribution per limiting factor for the two limited resources (wood and direct labour), linear programming must
be used to determine the optimal mix of the two products. (Note: Mark only awarded if decision and reason both included.) 1M
(d) Calculate the maximum rate per hour that Woodpecker should pay the skilled workers, who manufacture the tables and chairs, for one hour
MARKS 6,0
of overtime for the month ended 31 December 2021. Do not use the dual method in your answer.
Let x = number of tables; y = number of chairs
Wood 3x + 2y = 6 000 0,5 R/W
Direct labour 4x + 5y = 9 601 0,5 R/W

Wood (multiply by 4) 12x +8y = 24 000 0,5 M

Direct labour (multiply by 3) 12x +15y = 28 803 0,5 M

Solve for y y = 686,14 0,5 M

Solve for x x = 1542,57 0,5 M

Contribution with additional labour C = (R936 x 1542.57)^ + (R850 x 686.14)^

1M
= R2 027 068,29
Less: Original contribution C = R2 026 971,43 0,5 R/W
Shadow price for direct labour (per hour)
0,5 M
R96,86

Maximum price to be paid for one additional hour of direct labour (R100^+R96.86^)
R196,86 1M