Comfy Limited manufactures glass ornaments and housewares. The business makes use of unskilled labour and provides training to do hand crafting of the goods. In January, they decided to add a fruit bowl to the range. It took 45.60 hours to complete the first two fruit bowls. It was found that labour hours reduced as cumulative output increased, and it is expected that this trend will continue until 64 fruit bowls have been manufactured. The total number of hours to complete the next two fruit bowls was 41.04 hours. The labour and material costs to manufacture the first four fruit bowls, which have already been sold, were as follows: Direct materials: R1 360 Direct labour: R1 420 Additional information:
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Comfy Limited manufactures glass ornaments and housewares. The business makes use of unskilled labour and provides training to do hand crafting of the goods. In January, they decided to add a fruit bowl to the range. It took 45.60 hours to complete the first two fruit bowls. It was found that labour hours reduced as cumulative output increased, and it is expected that this trend will continue until 64 fruit bowls have been manufactured. The total number of hours to complete the next two fruit bowls was 41.04 hours. The labour and material costs to manufacture the first four fruit bowls, which have already been sold, were as follows:
Direct materials: R1 360
Direct labour: R1 420
Additional information:
A gift shop owner saw these fruit bowls and has asked for a quotation for 12 to add to its range of products.
Since the first four fruit bowls were manufactured, the price of material increased by 8%, and the cost of labour by 15%.
Comfy Limited paid the designer of the fruit bowl R1 600. They have committed to producing and selling only 64 of these fruit bowls which will be complete within the next few months.
Sundry materials amount to R1.50 per fruit bowl.
Other variable manufacturing overheads are allocated at R1.00 per direct labour hour.
Monthly fixed costs of the business amount to R15 200, of which 10% applies to the above order.
Required:
a) Calculate the learning curve
b) Calculate the quotation price for the 12 fruit bowls if the business requires a profit margin of 25% on quotation price. Note: round off ALL calculations to the nearest two decimal places.
c) Calculate the total time required to manufacture units 17 to 32
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