Question

Background: Y Ltd produces and sells a single product, Y1. The unit specifications of the product...

Background:

Y Ltd produces and sells a single product, Y1. The unit specifications of the product are as follows:

Direct material AY:                              12 kg at £4 per kg

Machine time:                                       2 running hours

Machine cost per gross hour:                   £50

Selling price per unit:                             £180

Y Ltd is required to fulfil orders for 8,000 units of Y1 per year. There are no stocks of product units at the beginning or the end of the year. Also, the stock level of the material AY remains unchanged throughout the year.

The following additional information affects the costs and revenues:

  1. Production quantity is increased to allow for returns from customers which are replaced free of charge. Returns are due to specification failure and account for 5% of units initially delivered to customers.

  1. Production quantity is further increased to allow for the downgrading of 16% of product units at the final inspection stage.

  1. 6% of the material AY input to the machine process is wasted due to processing problems.

  1. 7% of the incoming material AY from suppliers is scrapped due to poor receipt and storage organisation.

  1. All of the returned units from customers are rectified using 0.5 hours of machine running time per unit.

  1. Machine running time is 80% of gross machine hours and 20% of gross machine hours is machine idle time.

  1. Both downgraded production units found at the inspection stage, and rectified units returned from customers are sold at a discount of 25% on the standard selling price.

Y Ltd is aware of the problem of excess costs and it is planning a quality management programme to prevent a number of such problems from occurring. The programme will cost £75,000 and it is estimated that the programme will have the following impact:

  1. A reduction in returns of products from customers to 2% of the units initially delivered.

  1. A reduction in the downgrading of product units at inspection to 4% at the final inspection stage.

  1. A reduction in the material AY losses in process to 1% of the input to the machine process.

  1. A reduction in stores losses of the material AY to 2% of the incoming materials.

  1. A reduction in machine idle time to 10% of gross hours used.

Question:

Prepare summaries showing the calculations of (i) total production units (pre-inspection), (ii) purchases of material AY (kg), (iii) gross machine hours and (iv) total sales revenue for the year. In each case the figures are required for the situation both before and after the implementation of the quality management programme, in order that the order for 8,000 units of the product may be fulfilled.

Homework Answers

Answer #1

Existing

After TQM Prog

  1. Total Production Units (Preinspection)

Total Sales requirements

8000

8000

Specification Loss

400 (8000*5%)

160 (8000*2%)

8400

8160

Downgrading at inspection

1600 (16/84*8400)

340 (4/96*8160)

Total Units before inspection

10000

8500

  1. Purchase of Material AY (kg)

Material required to meet pre inspection production requirement

120000 (12*10000)

102000 (12*8500)

Processing loss

7659 (6/94*120000)

1030 (1/99*102000)

Total Purchases

127659

103030

  1. Gross Machine Hours

Initial requirement

20000 (10000*2)

17000 (8500*2)

Idle Time

5000 (20000*20/80)

1889 (17000*10/90)

Gross Time

25000

18889

  1. Sales Revenue

14,40,000 (8000*180)

14,40,000 (8000*180)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In Zhuang LTD , data concerning two products are Contribution margin per unit—Product A $10, Product...
In Zhuang LTD , data concerning two products are Contribution margin per unit—Product A $10, Product B $12; machine hours required for one unit—Product A 2, Product B 3. a) Calculate the contribution margin per unit of the limited resource for each product: Product A: $ Answer per hour Product B: $ Answer per hour b) If Zhuang LTD has a limited number of machine hours and can sell all the units produced of either product, which product should it...
In Zhuang LTD , data concerning two products are Contribution margin per unit—Product A $10, Product...
In Zhuang LTD , data concerning two products are Contribution margin per unit—Product A $10, Product B $12; machine hours required for one unit—Product A 2, Product B 3. a) Calculate the contribution margin per unit of the limited resource for each product: Product A: $ Answer per hour Product B: $ Answer per hour b) If Zhuang LTD has a limited number of machine hours and can sell all the units produced of either product, which product should it...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 53,000 units per month is as follows: Direct materials $ 49.10 Direct labor $ 9.40 Variable manufacturing overhead $ 2.40 Fixed manufacturing overhead $ 19.90 Variable selling & administrative expense $ 4.40 Fixed selling & administrative expense $ 21.00 The normal selling price of the product is $112.10 per unit. An order has been received...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: Direct materials $ 22.50 Direct labor $ 7.50 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 19.00 Variable selling & administrative expense $ 2.70 Fixed selling & administrative expense $ 8.60 The normal selling price of the product is $67.80 per unit. An order has been received...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: Direct materials $ 22.50 Direct labor $ 7.50 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 19.00 Variable selling & administrative expense $ 2.70 Fixed selling & administrative expense $ 8.60 The normal selling price of the product is $67.80 per unit. An order has been received...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of...
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 58,000 units per month is as follows: Direct materials $ 51.60 Direct labor $ 9.90 Variable manufacturing overhead $ 2.90 Fixed manufacturing overhead $ 20.90 Variable selling & administrative expense $ 5.40 Fixed selling & administrative expense $ 26.00 The normal selling price of the product is $122.10 per unit. An order has been received...
Eley Corporation produces a single product. The cost of producing and selling a single unit of...
Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 52,000 units per month is as follows: Direct materials $30.00 Direct labor $8.00 Variable manufacturing overhead $3.60 Fixed manufacturing overhead $12.80 Variable selling & administrative expense $3.10 Fixed selling & administrative expense $6.30 The normal selling price of the product is $52.30 per unit. An order has been received from an overseas customer for 3,200...
12. Elfalan Corporation produces a single product. The cost of producing and selling a single unit...
12. Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 51,000 units per month is as follows: Direct materials $ 48.10 Direct labor $ 9.20 Variable manufacturing overhead $ 2.20 Fixed manufacturing overhead $ 19.50 Variable selling & administrative expense $ 4.00 Fixed selling & administrative expense $ 19.00 The normal selling price of the product is $108.10 per unit. An order has been...
Amben ltd a furniture production company has three production centers: Machine shop X, machine shop Y...
Amben ltd a furniture production company has three production centers: Machine shop X, machine shop Y and one assembly center. From the data below compute the overhead absorption rates for each center Production center        Overhead        machine hours             labour hours Machine shop X          $4,300,000     1,000,000                    500,000 Machine shop Y          $3,800,000     500,000                       1,000,000 Assembly                    $3,600,000     800,000                       1,200,000 Two products A and B were manufactured during the period: Product A (100 units)                                                 $ Direct costs (100 units X $100)                                  10,000 Overheads:            ...
MC Bristol Electronics produces wide range of... Bristol Electronics produces wide range of electronic products. The...
MC Bristol Electronics produces wide range of... Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2017. Cost data Total manufacturing overhead for year £1,000,000 Total hours for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT