Question

In: Accounting

( B ) : In each quarter of every year, the maximum capacity of the "MBA...

( B ) : In each quarter of every year, the maximum capacity of the "MBA

Co." is 4000 hours available for sorting and re-packing two sorts of imported apples in special boxes where each box contains only one ton of either the red or the yellow apples. The monthly common committed fixed costs of the company is L.E. 100000, and the following estimates are presented in relation to the coming quarter which will start July 1, 2015 :-

red

Yellow

Maximum demand in the local market.

150 boxes

300 boxes

Selling price per box.

L.E 12000

L.E 10000

Sorting and re-packing time required per box.

20 Hours

10 Hours

Contribution margin per hour of sorting and re-packing

L.E. 300

L.E 400

               

eqrequired :

Use appropriate traditional managerial accounting marginal analysis techniques to determine the optimal imports mix the   company should consider for the third quarter of 2015, then prepare this quarter's expected detailed income statement.

Solutions

Expert Solution

Given,

Maximum Capacity of MBA Co for sorting and re-packing is 4000 hrs.

So, we have to allocate the available 4000 hrs for red and yellow apple sorting and re-packing in a mix that the MBA Co earns the maximum profit.

Ranking of the product based on Contribution per hour of sorting and re-packing :

Particulars Red Apple Yellow Apple
Contribution margin per hour of sorting and re-packing L.E.300 L.E.400
Ranking II I

Allocation of 4000 hrs available for sorting and re-packing :

Maximum Demand for Yellow Apple in this quarter is 300 boxes.

So, hours required for sorting and re-packing will be 300*10=3000 hrs

Remaining hours =4000-3000= 1000 hrs

Possible sorting and re-packing for red apple =1000hrs/20hrs per box=50 boxes

Therefore, the optimal import mix for the third quarter of 2015 :

Yellow Apple = 300 Boxes

Red Apple = 50 Boxes

Expected Income Statement for the Third quarter of 2015 :

Particulars Red Apple (L.E.) Yellow Apple (L.E.) Total (L.E.)
Sales Revenue

600000

(50*12000)

3000000

(300*10000)

3600000
Less : Variable Cost

300000

(50*6000)

1800000

(300*6000)

2100000
Contributions 300000 1200000 1500000
Less : Fixed Cost (100000 per month * 3 months) 300000
Net Income 1200000

Notes :

Variable Cost per unit = Selling price per unit - Contribution per unit

Red Apple Variable Cost per unit = 12000-(20*300) = 12000-6000 = L.E.6000

Yellow Apple Variable Cost per unit = 10000-(10*400) = 10000-4000 = L.E.6000.

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Thanks.


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