Question

GF is a company that manufactures clothes for the fashion industry. The fashion industry is fast moving, and consumer demand can change quickly due to the emergence of new trends. GF manufactures three items of clothing: The S, the T and the B using the same resources but in different amounts. Budget information per unit is as follows: S T B Selling Price $250 $40 $100 Direct materials ($20/m2 ) $100 $10 $30 Direct Labor ($12/hr) $36 $12 $27 Variable Overhead ($3/machine hour) $9 $3 $6.75 Total fixed costs are $300 000 per month. Included in the original budget constructed at the start of the year, was the sales demand for the month of March as shown below S T B Demand in March(units) 2,000 6,000 4,000 After the original budget had been constructed, items of clothing S, T and B have featured in a fashion magazine. As a result of this, a new customer (a fashion retailer), has ordered 1000 units each of S, T and B for delivery in March. The budgeted demand shown above does not include this order from the new customer. In March there will be limited resources available. Resources will be limited to: Direct materials: 14 500 m2 Direct labor: 30,000 hours There will be no opening inventory of material, work in progress or finished goods in March. a) With the new order in place and the resource restriction, is it feasible to produce the current order? Support your answer with calculations.(1 mark) NOTE: You should assume that the new customer’s order must be supplied in full. b) If the new order is given priority (1000 pieces per product), how many additional pieces

Answer 1