Management Accounting: Justin PLC Case study - Research Paper Example

Download file to see previous pages Details
Alice 300
Alice 700
Demand in Units
8000
7000
Selling Price
240
280
Sales Value
1,920,000
1,960,000
Variable Expenses:
Material Cost
1,040,000
1,050,000
Direct Labour
62,400
78,400
Other Variable Overheads

67,200
89,600
Total Variable Expenses
1,169,600
1,218,000
Contribution
750,400
742,000
Direct Fixed Overheads
150,000
150,000
Other Fixed General
Overheads
278,400
243,600
Total Fixed Expenses
428,400
393,600
Net Profit/Loss
322,000
348,400
Net Profit for July 2007:

Net Profit from Alice 300 322,000
Net Profit from Alice 700 348,400
Net Profit for July 2007 670,400
(c) Labour Hours:
Labour Hours Required:
For Alice 300 8000 units @ 0.60 hours/unit = 4,800 Hours
For Alice 700 7000 units @ o,80 hours/unit = 5,600 Hours
Total Labour Hours Required = 10,400 Hours
Labour Hours Available:
Total Working Days for July 2007 = 22 days
Total Number of employees = 80
No of working Hours per day = 8
Total number of working hours available = 22 X 80 X 8 = 14,080 Hours
As against the required labour hours of 10,400, the company can afford 14,080 labour hours. Hence the labour hours are not a limiting factor.
Note: The requirement of the labour hours has been worked...
This is due to the reason that Alice 300 is making the maximum number
In view of the shortage of the component R 5674 and inability of the manufacturer to produce and supply the component, there is the potential danger of the company's production being affected for want of this particular component in the line.
As it appears that the current supplier would be able to resume his production and supply us the required quantity it is advisable that the company identify a prospective manufacturer who can meet the production needs of the company. However the following criteria should be kept in mind while selecting the new supplier:
Reliability: Next to quality, the supplier should be extremely reliable in terms of timely delivery. Being an essential component for the manufacture of the company's products the reliability of the supplier for timely deliveries should be thoroughly verified with the record of performance with any other manufacturer with whom the supplier has business relationship.
It is recommended that the selection for an alternative supplier may be undertaken as a permanent measure instead of as a stop gap arrangement, as it is always advisable to have alternative sources of supply.
This issue should be addressed rather urgently as the production can pull on with the available components to meet the demands for months just before Christmas. ...Download file to see next pagesRead More