Question

a) Solomom Butyeti is a shift foreman working for Lufunsa God mining Plc. Oflate he has been contemplating how the labour efficiency could be improved.one day you met at a coffee shop at one of the shopping malls in Lusaka where he disclosed that he was facing challenges to measure individual and as a result employees were introduce to group bonus schemes.
He asked you to identify and explain TWO advantages and TWO disadvantages of group bonus schemes.
b) Biggie had just retired and is considering running a retail business dealing in 500mls hand sanitizers. The sales price per unit is to be pegged at K60 and variable costs is expected to be K25 per unit. Total fixed cost is budgeted to be K150,000.
REQUIRED
To determine the following:
i) Breakeven point in units and value.
ii) Contribution to sales ratio.
iii) The target units if Biggie wishes to make a profit of K40,000.

iv) Target profit should he plan to sell 5000 units of 500mls hand sanitizers.

c) Covid Chilupula has two production departments Theta and Beta and two service departments Gamma and Omega. Total allocated and apportioned overheads for each department are as follows:
THETA BETA GAMMA OMEGA
K125, 000 K80, 000 K20, 000 K40, 000
Gamma and Omega perform services for both production departments and Gamma also provides services for OMEGA in the following proportions.
` THETA BETA GAMMA OMEGA
Percentage of Gamma to 60 25 _ 15
Percentage of Omega to 65 35 _ _
What should be the overheads for the production departments once the service department costs have been apportioned?
(

Answer 1

a. Group bonus scheme is an incentive plan given to number of worker working on project according to proportion of time worked and rank held. In group bonus scheme, bonus is awared based on the effort of team work as many times it is not possible to measure performance and productivity based on individual effort.

Advantage of group bonus scheme are :

- It boost team spirit among the workers of Same group and cooperation among them increases.

- This scheme reduces supervision time and administering the worker are much simpler.

- It increases efficiency of worker as they are determined to achieve the target.

- might encourage flexible working arrangements in the group

Disadvantage of group bonus scheme is :

- some worker may not given fair bonus what they deserve

- The might be argument with respect to percentage of bonus among them

- some employees may work harder than other and even then get same bonus

B.1.Calculation of break even units and value:

Break even point in value = fixed cost/profit volume ratio

Profit volume ratio =contribution / sales

Contribution = sales - variable cost = K60-K25 = K35 profit volume ratio =( K35 /K60) ×100 = 58.33%

Break even point in value = K150000/58.33% =257142.85

Break even point in units =K150000/K35 = 4285.71

2. Contribution to sales ratio =( contribution /sales )× 100   

= (K35/K60) ×100 = 58.33%

3.Target units to earn profit of K40000:

=( fixed cost +profit) /contribution per units

=( K150000+K40000) /K35

=5428.57 units

4. Target profit to sell 5000 units of hand sanitizer:

=(contribution ×units) -fixed cost

= (5000× K35) -150000 =K25000 profit.

C. ​​​​