KK Limited is a company that manufactures made in Ghana clothes for the fashion industry. The fashion industry in Ghana is fast moving and consumer demand can change quickly due to the emergence of new trends. KK Limited manufactures three items of clothing: the GEM A, the GEM B and the GEM C using the same resources but in different amounts. Budgeted information per unit is as follows:   GEM A GEM B GEM C   GHS GHS GHS Selling price 250 40 100 Direct materials (GHS20 per cm) 100 10 30 Direct labour (GHS12 per hour) 36 12 27 Variable overheads (GHS3 per machine hours) 9 3 6.75 Total fixed costs are GHS300,000 per month. Included in the original budget constructed at the start of the year, was the sales demand for the month of March as shown below:   GEM A GEM B GEM C Demand in March (units) 2,000 6,000 4,000 After the original budget had been constructed, items of clothing GEM A, GEM B and GEM C have featured in a fashion magazine. As a result of this, a new customer (a fashion retailer), has ordered 1,000 units each of GEM A, GEM B and GEM C for delivery in March. The budgeted demand shown above does not include this order from the new customer. In March there will be limited resources available. Resources will be limited to: Direct materials             14,500 cm Direct labour                  30,000 hours There will be no opening inventory of materials, work in progress or finished goods in March. REQUIRED: Produce a statement that shows the optimal production plan and the resulting profit or loss for March

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

KK Limited is a company that manufactures made in Ghana clothes for the fashion industry. The fashion industry in Ghana is fast moving and consumer demand can change quickly due to the emergence of new trends. KK Limited manufactures three items of clothing: the GEM A, the GEM B and the GEM C using the same resources but in different amounts.

Budgeted information per unit is as follows:

 

GEM A

GEM B

GEM C

 

GHS

GHS

GHS

Selling price

250

40

100

Direct materials (GHS20 per cm)

100

10

30

Direct labour (GHS12 per hour)

36

12

27

Variable overheads (GHS3 per machine hours)

9

3

6.75

Total fixed costs are GHS300,000 per month.

Included in the original budget constructed at the start of the year, was the sales

demand for the month of March as shown below:

 

GEM A

GEM B

GEM C

Demand in March (units)

2,000

6,000

4,000

After the original budget had been constructed, items of clothing GEM A, GEM B and GEM C have featured in a fashion magazine. As a result of this, a new customer (a fashion retailer), has ordered 1,000 units each of GEM A, GEM B and GEM C for delivery in March. The budgeted demand shown above does not include this order from the new customer.

In March there will be limited resources available. Resources will be limited to: Direct materials             14,500 cm

Direct labour                  30,000 hours

There will be no opening inventory of materials, work in progress or finished goods in March.

REQUIRED:

Produce a statement that shows the optimal production plan and the resulting profit or loss for March.

Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education