Continental Engineering Ltd manufactures three types of ceramic coffee percolator; the Silver, Gold and the Platinum models. The maximum market demand and resource requirements of each of these products are shown below.   The percolators are made from an advanced heat-resistant material that gives the firm a competitive advantage. An email from the purchasing manager has informed you that, because of a problem with the supplier, it should be assumed that the half year’s supply of this special material is limited to 90,000kg.   Continental operates on a just-in-time production (JIT) method so that opening and closing inventory levels are zero.   The sales director has already accepted an order for 5,000 Gold percolators that, if not fulfilled, would incur a financial penalty of £10,000. This order is included in the Gold’s maximum market demand figure.   Continental’s directors need to know whether they should go ahead and satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty.   Budgeted data for the first half of 2021     Silver Gold Platinum Maximum demand 10,000 15,000 8,000 Heat resistant material per unit 2 Kg 5 Kg 6 Kg   Actual results for first half of 2020     Silver Gold Platinum Total Sales (units) 8,000 4,000 5,000   Sales revenue (£) 180,000 150,000 500,000 830,000           Raw materials (£) 60,000 66,000 144,000 270,000 Direct labour (£) 24,000 20,000 130,000 174,000 Overheads (£) 60,000 42,000 120,000 222,000 Total Costs 144,000 128,000 394,000 666,000 Profit / (Loss) (£) 36,000 22,000 106,000 164,000   Actual results for second half of 2020     Silver Gold Platinum Total Sales (units) 9,000 4,500 7,000   Sales revenue (£) 202,500 168,750 700,000 1,071,250           Raw materials (£) 67,500 74,250 201,600 343,350 Direct labour (£) 27,000 22,500 182,000 231,500 Overheads (£) 66,000 45,750 163,200 274,950 Total Costs 160,500 142,500 546,800 849,800 Profit / (Loss) (£) 42,000 26,250 153,200 221,450     Required:   Prepare the following workings, analysed by product, based on the above information: Calculate fixed and variable overheads using the high/low method.  Marginal cost card showing selling price, variable costs, and contribution per unit for    each product.                                                                                                                        Contribution per unit of scarce resource and your decision for ranking the product to    be produced first based on the highest contribution.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Continental Engineering Ltd manufactures three types of ceramic coffee percolator; the Silver, Gold and the Platinum models. The maximum market demand and resource requirements of each of these products are shown below.

 

The percolators are made from an advanced heat-resistant material that gives the firm a competitive advantage. An email from the purchasing manager has informed you that, because of a problem with the supplier, it should be assumed that the half year’s supply of this special material is limited to 90,000kg.

 

Continental operates on a just-in-time production (JIT) method so that opening and closing inventory levels are zero.

 

The sales director has already accepted an order for 5,000 Gold percolators that, if not fulfilled, would incur a financial penalty of £10,000. This order is included in the Gold’s maximum market demand figure.

 

Continental’s directors need to know whether they should go ahead and satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty.

 

Budgeted data for the first half of 2021

 

 

Silver

Gold

Platinum

Maximum demand

10,000

15,000

8,000

Heat resistant material per unit

2 Kg

5 Kg

6 Kg

 

Actual results for first half of 2020

 

 

Silver

Gold

Platinum

Total

Sales (units)

8,000

4,000

5,000

 

Sales revenue (£)

180,000

150,000

500,000

830,000

 

 

 

 

 

Raw materials (£)

60,000

66,000

144,000

270,000

Direct labour (£)

24,000

20,000

130,000

174,000

Overheads (£)

60,000

42,000

120,000

222,000

Total Costs

144,000

128,000

394,000

666,000

Profit / (Loss) (£)

36,000

22,000

106,000

164,000

 

Actual results for second half of 2020

 

 

Silver

Gold

Platinum

Total

Sales (units)

9,000

4,500

7,000

 

Sales revenue (£)

202,500

168,750

700,000

1,071,250

 

 

 

 

 

Raw materials (£)

67,500

74,250

201,600

343,350

Direct labour (£)

27,000

22,500

182,000

231,500

Overheads (£)

66,000

45,750

163,200

274,950

Total Costs

160,500

142,500

546,800

849,800

Profit / (Loss) (£)

42,000

26,250

153,200

221,450

 

 

Required:

 

  • Prepare the following workings, analysed by product, based on the above information:
    • Calculate fixed and variable overheads using the high/low method. 
    • Marginal cost card showing selling price, variable costs, and contribution per unit for

   each product.                                                                                                                       

  • Contribution per unit of scarce resource and your decision for ranking the product to

   be produced first based on the highest contribution.                                     

                                                                                                                4.1 

 

  • Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Gold contract
  • Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Gold contract

                                                                                                                           

 

Advise the company what action should be taken based on your analysis. 

please do the calculations part only..                                                                                                                                                           

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