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Homework answers / question archive /                 Hoi Poloi plc makes 3 types of filing cabinet,four- drawer ,three drawer and two drawer

                Hoi Poloi plc makes 3 types of filing cabinet,four- drawer ,three drawer and two drawer

Accounting

               
Hoi Poloi plc makes 3 types of filing cabinet,four- drawer ,three drawer and two drawer.
The business uses general purposde machines which are equally suitable to be used
in the manufacture of all three products.        
               
Data for the year ended 30 April 2005 was as follows :      
               
               
    four drawer three drawer two drawer
    $   $   $  
               
Total sales 410 400    123 900    427 500  
Total variable costs 304 000   88 500   285 000  
Allocated fixed costs 98 000   48 000   135 000  
Profit(loss) 8400   (12 600)   7 500  
               
It had been proposed that the three-drawer cabinet be discontinued,as it was making
a loss.              
               
(a) State whether this proposal should have been agree,giving your reasons.  
               
               
Sales and cost data for the year ended 30 April 2006 were as follows :  
               
      four- drawer three-drawer two-drawer
               
Sales in units   15 000   6 000   30 000
               
Raw materials   $12   $8   $4
Variable overheads   $3   $2   $2
Unit contribution   $7   $6   $5
               
Machine hours per unit 0. 5   0. 5   0 .4 
               
Machine operators are paid  $ 10 per hour.        
Allocation of fixed costs $ 98 000   $ 48 000   $ 135 000
               
Required :            
               
( b ) calculate the selling price per unit for each product.    
( c ) calculate for each product the break-even point in both units and sales value.
( d ) calculate for each product the profit or loss for the year ended 30 April 2006.
               
To try to improve profits for the year ending 30 April 2007,it has been suggested that a
better quality,more easily worked, raw material be purchased. This would increase the 
cost of raw materials by five percent ( 5 % ) but would offer savings fo ten percent ( 10 %)
on loabour. Sales and other costs would remain unchanged.    
               
(e) calculate for each product and in total the profit ot loss if this suggestion is put 
into effect.            

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