[ridhs]

Thank u Sir

[ridhs]

gr8…thanks a lot Sir!!thank u so very much!

[ridhs]

Dear Sir,

Thanks a lot for your reply!

Sir, for your reference please find the complete question along with its solution as mentioned in the study text, and request you to please guide me what should be the correct selling price 100 or 95.

A company produces Widgets and Splodgets which are fairly standardised products. The following information relates to period 1. The standard selling price of Widgets is$50eachandSplodgets $100each. In Period 1,therewas a special promotion on Splodgets with a 5%discount being offered. All units produced are sold and no inventory is held. To produce a Widget they use 5kg of X and in Period 1,their plans were based on a cost of X of $3per kg. Due to market movements the actual price changed; if they had purchased efficiently, the cost would havebeen$4.50perkg.Production of Widgets was2,000units. A Splodget uses raw material Z but again the price of this can change rapidly. It was thought that Z would cost $30 per tonne but in fact they only paid $25 per tonne and if they had purchased correctly the cost would have been less, as it was freely available at only $23 per tonne. It usually takes 1.5tonnes of Z to produce 1Splodget and 500Splodgets are usually produced. Each Widget takes three hours to produce and each Splodget two hours. Labour is paid $5 per hour. At the start of Period 1,management negotiated a job security package with the workforce in exchange for a promised 5%increase inefficiency –that is,that the workers would make the Widgets and Splodgets in 95%of the time stated in the original budget. Fixed overheads are usually$12,000 every period and variable overheads are $3per labour hour. Required Produce the original budget and and a revised budget allowing for controllable factors in a suitable format.

Solution:
Original budget for Period 1 $
Sales revenue((2,000 ×$50) +(500 ×$100)) 150,000
Material costs X(2,000 ×5kg×$3) 30,000
Materialcosts Z(500 ×$30×1.5) 22,500
Labourcosts((2,000 ×3×$5)+(500×2×$5)) 35,000
Variableoverheads((2,000 ×3×$3)+(500 ×2×$3)) 21,000
Fixedoverheads 12,000

Profit 29,500

Revised budget for Period 1 $
Sales revenue((2,000 ×$50) +(500 ×$100)) 150,000
Material costs X(2,000 ×5kg×$4.5) 45,000
Material costs Z(500 ×$23×1.5) 17,250
Labour costs((2,000 ×3×$5)+(500 ×2×$5))×0.95 33,250
Variable overheads((2,000 ×3×$3)+(500 ×2×$3))×0.95 19,950
Fixed overheads 12,000

Profit 22,550

Sir, please suggest

Thanks and Regards,

Ridhima

[ridhs]

Got it..Thanks a lot Sir

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