Prepare an Overhead Analysis Statement for June Year 3

6. PART A
Uslam Ltd manufacture 3 products, A, B and C.
The details below relate to Year 2.
A B C
Selling price per unit £74 £67 £61
Direct material cost per unit £18 £27 £15
Direct labour cost per unit £24 £8 £12
Variable overhead cost per unit £8 £5 £9
Annual demand (units) 3,000 3,000 3,000
The material used in production costs £3 per kilogram. Fixed costs per annum total £200,000.
(a) Calculate for Year 2:
(i) the contribution per unit for each product;
(ii) the profit per annum if demand is met.
For Year 3 Uslam Ltd has discovered that the material available to them will fall by 12,000 kilograms.
Demand for the products is expected to be the same as in Year 2.
(b) Calculate for Year 3:
(i) the total number of kilograms of material which will be available;
(ii) the contribution per kilogram for each product;
(iii) number of kilograms of material to be allocated to the production of each product in
order to maximise profit, if a minimum of 2,000 units of each product must be
produced;
(iv) the reduction in profit which will arise from your answer to (a)(ii) above, assuming Fixed
costs remain the same as Year 2.

PART B
Craig Ltd operates a factory with two production departments, Machining and Assembly, and a
Maintenance department.
The following overheads are estimated for the month of June Year 3.
Overhead Total Cost
Machine Depreciation £2,000
Rent £7,500
Supervision £4,000
The following details are also available.
Machining Assembly Maintenance
Number of Employees 30 15 5
Area (sq.m.) 2,500 2,000 500
Value of Machinery £60,000 £40,000 –
Machine Hours 2,800 2,200 –
Indirect Labour £200 £450 £850
(a) Prepare an Overhead Analysis Statement for June Year 3.
(b) Re-apportion the Maintenance Overheads on the basis of machine hours


 

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