In: Accounting
( 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.
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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