Taylor Manufacturing Plc produces three types of leather chairs. Budgeted costs and selling prices for the next financial year are as follows: Product Grand Basic Supreme Selling price/unit £ 312 £ 153.60 £ 393.60 Variable costs/unit Direct wages Machinists (£17.60/hr) 52.80 17.60 70.40 Finishers (£14.40/hr) 14.40 7.20 28.80 Direct materials 11.20 4.80 12.80 Variable overheads 11.20 5.60 11.20 89.60 35.20 123.20 Expected sales units 19200 16800 14400 Total fixed overheads for the period are expected to be £1,296,000 Owing to high demand in the local area for finishers the directors of Taylor Manufacturing Plc have forecast that only 80% of finisher’s hours will be available for the production plans for the next financial period. This will lead to a shortage of finisher hours and the inability to meet total production. Required: What do you understand by a constraint resource within a manufacturing company? Using the information above, indicate the most profitable production mix that the company should adopt, based on the restricted finisher hours. What is the maximum contribution possible given the constraint? What is the maximum profit possible given the constraint?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
- Taylor Manufacturing Plc produces three types of leather chairs. Budgeted costs and selling prices for the next financial year are as follows:
|
Product |
Grand |
Basic |
Supreme |
|
Selling price/unit |
£ 312 |
£ 153.60 |
£ 393.60 |
|
Variable costs/unit |
|
|
|
|
Direct wages |
|
|
|
|
Machinists (£17.60/hr) |
52.80 |
17.60 |
70.40 |
|
Finishers (£14.40/hr) |
14.40 |
7.20 |
28.80 |
|
Direct materials |
11.20 |
4.80 |
12.80 |
|
Variable |
11.20 |
5.60 |
11.20 |
|
|
89.60 |
35.20 |
123.20 |
|
|
|
|
|
|
Expected sales units |
19200 |
16800 |
14400 |
Total fixed overheads for the period are expected to be £1,296,000
Owing to high demand in the local area for finishers the directors of Taylor Manufacturing Plc have
Required:
- What do you understand by a constraint resource within a manufacturing company?
- Using the information above, indicate the most profitable production mix that the company should adopt, based on the restricted finisher hours.
- What is the maximum contribution possible given the constraint?
- What is the maximum profit possible given the constraint?
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