Richard Ltd makes three products, Soya, Milco and Yoghurt. All the three products must be offered for sale each month in order to provide a complete market service. The products are fragile and their quality deteriorates rapidly shortly after production. The products are produced on two types of machine and worked on a single grade of direct labour. Fifty direct employees are paid £8.00 per hour for a guaranteed minimum of 160 hours per month. All the products are first pasteurised on a machine type A and then finished and sealed on a machine type B. The machine hour requirements for each of the products are as follows: Yoghurt Hours per unit Machine Type A Machine Type B Soya Milco Hours per unit Hours per unit 1.5 4.5 1.0 2.5 The capacity of the available machines type A and B are 6,000 hours and 5,000 hours per month respectively. Details of the selling prices, unit costs and monthly demand for the three products are as follows: Soya £ per unit cost. You are required to: Selling price Concentrate cost Other direct material cost Direct labour cost @£8.00 per hour Overheads 3.0 2.0 Milco £ per unit 1,740 190 110 480 620 340 700 Yoghurt £ per unit 910 1,400 220 160 230 140 60 360 240 520 Profit 160 220 600 Maximum monthly demand (units) 1200 Although, Richard Limited uses marginal costing and contribution analysis as the basis for its decision making activities, profits are reported in the monthly management accounts using the absorption costing basis. Finished goods inventories are valued in the monthly management accounts at full absorption d. Use a throughput approach to calculate the throughput -maximising monthly output of the three products
Richard Ltd makes three products, Soya, Milco and Yoghurt. All the three products must be offered for sale each month in order to provide a complete market service. The products are fragile and their quality deteriorates rapidly shortly after production. The products are produced on two types of machine and worked on a single grade of direct labour. Fifty direct employees are paid £8.00 per hour for a guaranteed minimum of 160 hours per month. All the products are first pasteurised on a machine type A and then finished and sealed on a machine type B. The machine hour requirements for each of the products are as follows: Yoghurt Hours per unit Machine Type A Machine Type B Soya Milco Hours per unit Hours per unit 1.5 4.5 1.0 2.5 The capacity of the available machines type A and B are 6,000 hours and 5,000 hours per month respectively. Details of the selling prices, unit costs and monthly demand for the three products are as follows: Soya £ per unit cost. You are required to: Selling price Concentrate cost Other direct material cost Direct labour cost @£8.00 per hour Overheads 3.0 2.0 Milco £ per unit 1,740 190 110 480 620 340 700 Yoghurt £ per unit 910 1,400 220 160 230 140 60 360 240 520 Profit 160 220 600 Maximum monthly demand (units) 1200 Although, Richard Limited uses marginal costing and contribution analysis as the basis for its decision making activities, profits are reported in the monthly management accounts using the absorption costing basis. Finished goods inventories are valued in the monthly management accounts at full absorption d. Use a throughput approach to calculate the throughput -maximising monthly output of the three products
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Richard Ltd makes three products, Soya, Milco and Yoghurt. All the three
products must be offered for sale each month in order to provide a complete
market service. The products are fragile and their quality deteriorates rapidly
shortly after production.
The products are produced on two types of machine and worked on a single
grade of direct labour. Fifty direct employees are paid £8.00 per hour for a
guaranteed minimum of 160 hours per month.
All the products are first pasteurised on a machine type A and then finished and
sealed on a machine type B.
The machine hour requirements for each of the products are as follows:
Soya
Milco
Yoghurt
Hours per unit Hours per unit
Hours per unit
4.5
1.5
1.0
2.5
Machine Type A
Machine Type B
The capacity of the available machines type A and B are 6,000 hours and 5,000 hours per month
respectively. Details of the selling prices, unit costs and monthly demand for the three products are
as follows:
Yoghurt
£ per unit
910
1,400
220
160
230
140
60
360
240
520
Profit
160
220
600
Maximum monthly demand (units) 1200
Although, Richard Limited uses marginal costing and contribution analysis as
the basis for its decision making activities, profits are reported in the monthly
management accounts using the absorption costing basis. Finished goods
inventories are valued in the monthly management accounts at full absorption
Soya
£ per unit
Selling price
Concentrate cost
Other direct material cost
Direct labour cost @ £8.00 per hour
Overheads
cost.
You are required to:
3.0
2.0
Milco
£ per unit
1,740
190
110
480
620
340
700
d. Use a throughput approach to calculate the throughput -maximising
monthly output of the three products
e. Explain the throughput accounting approach to optimising the level of
inventory and its valuation. Contrast this approach to the current system
employed by Richard.
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