Gemini plc manufactures four products using the same machinery. The following details relate to its products: ProductA £ per unit ProductB £ per unit ProductC £ per unit ProductD £ per unit Selling price 28 34 45 46 Direct material 6 7 9 7 Direct labour 5 5 10 10 Variable overhead 3 3 6 6 Fixed overhead * 8 8 16 16 Profit 6 11 4 7 Labour hours 1 1 2 2 Machine hours 4 3 4 5 Units Units Units Units Maximum demand per week 200 180 250 100 *Absorbed based on budgeted labour hours of 1000 per week. There is a maximum of 2000 machine hours available per week. A) Determine the production plan which will maximize the weekly profit of Gemini plc and prepare a profit statement showing the profit your plan will yield. - ANSWERED, SEE ATTACHED IMAGE Please see the findings of A) as an attachement. Please respond to part B) B) The marketing director of Gemini plc is concerned at the company’s inability to meet the quantity demanded by its customers. One consideration to overcome this is to increase the number of hours worked using the existing machinery by working overtime. Such overtime would be paid at a premium of 50% above normal labour rates, and variable overhead costs would be expected to increase in proportion to labour costs. Requirement: Critically evaluate this strategy and state your findings (quantitative and qualitative) as to the expected increase in contribution (if any) and discuss any issues (in particular in regard to overtime working) that could arise and would need to be resolved.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Gemini plc manufactures four products using the same machinery. The following details relate to its products:
|
|
ProductA £ per unit |
ProductB £ per unit |
ProductC £ per unit |
ProductD £ per unit |
|
Selling price |
28 |
34 | 45 | 46 |
|
Direct material |
6 | 7 | 9 | 7 |
|
Direct labour |
5 | 5 | 10 | 10 |
|
Variable overhead |
3 | 3 | 6 | 6 |
|
Fixed overhead * |
8 | 8 | 16 | 16 |
|
Profit |
6 | 11 | 4 | 7 |
|
Labour hours |
1 | 1 | 2 | 2 |
|
Machine hours |
4 | 3 | 4 | 5 |
| Units | Units | Units | Units | |
|
Maximum demand per week |
200 | 180 | 250 | 100 |
*Absorbed based on budgeted labour hours of 1000 per week.
There is a maximum of 2000 machine hours available per week.
A) Determine the production plan which will maximize the weekly profit of Gemini plc and
prepare a profit statement showing the profit your plan will yield. - ANSWERED, SEE ATTACHED IMAGE
Please see the findings of A) as an attachement. Please respond to part B)
B) The marketing director of Gemini plc is concerned at the company’s inability to meet the
quantity demanded by its customers. One consideration to overcome this is to increase the
number of hours worked using the existing machinery by working overtime. Such overtime
would be paid at a premium of 50% above normal labour rates, and variable overhead costs
would be expected to increase in proportion to labour costs.
Requirement:
Critically evaluate this strategy and state your findings (quantitative and qualitative) as to
the expected increase in contribution (if any) and discuss any issues (in particular in regard
to overtime working) that could arise and would need to be resolved.
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