Question

You are the manager of Compounders Ltd. The company mixes compound for smaller plastic extrusion companies....

You are the manager of Compounders Ltd. The company mixes compound for smaller plastic
extrusion companies. Compounders Ltd has six (6) mixing machines with a maximum capacity
(100%) of 250 ton per month. However, due to power cuts, the machines are currently being
operated at 75% of installed capacity.

One (1) ton of a compound mixture consists of two (2) raw materials: 0.7 ton of Electrolyte and
0.3 ton of Copper Wire. Assume no wastage. There are no opening and closing inventories.
All raw materials purchased are being used in the month of purchase, and all compound mixed
are being sold in the month mixed.

Each mixing machine requires two (2) operators. The company is operating a nine (9) hour
shift   and   each   machine   operator   earns   R75   per   hour.   No   weekend   time   nor   overtime   is
allowed.

The   company   is   a   price   setter   and   the   pricing   policy   is   based   on   a   mark-up   of   the   total
production cost at 50%.

The company incurred the following costs for the month:

1.     Import (purchase) raw material for one month’s production. Material Electrolyte @ R60
       per ton and Copper Wire @ R95 per ton.
2.     The import costs amount to R1,000 per 250 ton of Material Electrolyte and R1,500 per
       R120 ton of Copper Wire.
3.     Paid the wages based on a twenty (20) working days.
4.     The factory foreman earns a salary of R15,000 per month.
5.     The cost of security is as follows: Guard at the entrance of the factory R3,500 per month
       and the guard at the entrance to the admin offices R3,750 per month.
6.     The    monthly   rental   amounts   to   R25,000.   Rent   is allocated   based   on   floor space
       occupied. The factory occupies 9,100 ??2 and the office block 3,900 ??2.
7.     Office expenses amounts to R64,000 per month.
8.     Compound delivery cost amount to R1,200 per 125 ton of compound delivered.

Required:

1.1    Calculate the selling price per ton of the compound mixture. Use the following table in
       your workings as marks will also be awarded for individual calculations
                                                                                        (Max 20 marks)

       No             Cost incurred               Production Cost:(R)               Period Cost: (R)

1.2    Calculate the variable cost per ton of the compound mixture and the total fixed cost.

Use    the   following   table in your workings   as   marks   will also   be   awarded   for individual
calculations.                                                                                           (6)

       No               Cost incurred                    Variable: (R)              Fixed Cost: (R)

1.3    Calculate the contribution per ton produced.                                                     (2)
1.4    Calculate the break-even tons to be mixed                                                        (2)

Homework Answers

Answer #1

Current production = 250 ton *75% = 187.50ton

1 ton requires - .7 ton of electrolyte & .3 ton of copper wire

Hence, quantity of electrolyte required = 187.50*.7 =131.25 ton

Purchase cost of electrolyte = 131.25*60 = R7875

Import cost of electrolyte = 1000/250*131.25 = R525

Quantity of copper wire required = 56.25 ton

Purchase cost f copper wire = R5344

Import cost of copper wire = 1500/120*56.25 = R703

Operator costs = 6*2*9*75*20 = R162000

Hence, total Prodcution costs = R(7875+525+5344+703) = R14447

Factory foreman salary = R15000

Cost of security guard = R 7250

Rent = 25000*9100/13000= R17500

Office expenses = R64000

Delivery costs = 1200/125*187.50= R1800

Hence total costs = R281997

Hence the price = R422996

Hence price per ton = R2256 per ton

Note: The question has been sold assuming that the total production capacity of all 6 machines are 250ton @100% capacity.

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
Question 1 30 marks You are the manager of Compounders Ltd. The company mixes compound for...
Question 1 30 marks You are the manager of Compounders Ltd. The company mixes compound for smaller plastic extrusion companies. Compounders Ltd has six (6) mixing machines with a maximum capacity (100%) of 250 ton per machine. However, due to power cuts, the machines are currently being operated at 75% of installed capacity. One (1) ton of a compound mixture consists of two (2) raw materials: 0.7 ton of Electrolyte and 0.3 ton of Copper Wire. Assume no wastage. There...
Question 1: (30 marks) You are the manager of Compounders Ltd. The company mixes compound for...
Question 1: You are the manager of Compounders Ltd. The company mixes compound for smaller plastic extrusion companies. Compounders Ltd has six (6) mixing machines with a maximum capacity (100%) of 250 ton per machine. However, due to power cuts, the machines are currently being operated at 75% of installed capacity. One (1) ton of a compound mixture consists of two (2) raw materials: 0.7 ton of Electrolyte and 0.3 ton of Copper Wire. Assume no wastage. There are no...
Question 1 30 marks You are the manager of Compounders Ltd. The company mixes compound for...
Question 1 30 marks You are the manager of Compounders Ltd. The company mixes compound for smaller plastic extrusion companies. Compounders Ltd has six (6) mixing machines with a maximum capacity (100%) of 250 ton per month. However, due to power cuts, the machines are currently being operated at 75% of installed capacity. One (1) ton of a compound mixture consists of two (2) raw materials: 0.7 ton of Electrolyte and 0.3 ton of Copper Wire. Assume no wastage. There...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is being used in various extrusion processes. You are preparing for a management meeting. One of the points on the agenda is the explanation of the variance between actual production cost and standard production cost and to decide on action plans to address the reasons for the variance. The following is the standard cost per 1 ton of compound: Per Unit    Price Standard Cost...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is being used in various extrusion processes. You are preparing for a management meeting. One of the points on the agenda is the explanation of the variance between actual production cost and standard production cost and to decide on action plans to address the reasons for the variance. The following is the standard cost per 1 ton of compound: Per Unit Price Standard Cost per...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is...
You oversee the production facility of CC Compounders Ltd. CC Compounders Ltd manufactures compound which is being used in various extrusion processes. You are preparing for a management meeting. One of the points on the agenda is the explanation of the variance between actual production cost and standard production cost and to decide on action plans to address the reasons for the variance. The following is the standard cost per 1 ton of compound: Per Unit Price Standard Cost per...
Roles What do they know Sales Manager You want to sell 10,000 units in April, 15,000...
Roles What do they know Sales Manager You want to sell 10,000 units in April, 15,000 in May, 8,000 units in June at $20 each. Business Development You know that our competitor is struggling with manufacturing and supply is low, and your POV is that demand will increase by 10% in April and May Manufacturing Supervisor You have seen that raw material supply shipments are being delayed - and you want to keep 15% of next months production needs on...
Please show me how to apply CVP analysis for this case study. FLY ASH BRICK PROJECT:...
Please show me how to apply CVP analysis for this case study. FLY ASH BRICK PROJECT: FEASIBILITY STUDY USING CVP ANALYSIS S. K. Mitra and Shubhra Hajela wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT