Macro Hardware Limited manufactures two types of products, a laptop and an iPod and sells them in avery competitive market. Both products are funky light-weight products that are designed for the 15-to25-year-old age group market. Due to the popularity of their products, Macro Hardware Limited isconsidering expanding into different target markets during the next financial year that commences on 1July 2022. However, management wish to first evaluate the risk and expected profitability of the existingtarget market for 2022 before embarking on these new endeavours.Management has requested that the financial accountant collect all the relevant financial informationrelating to the two products for the 2022 financial year and prepare a budget for them for 2023. Thefinancial accountant is not sure how to allocate some of the cost between the two products, but all theother relevant budget information relating to the two products for the financial year ending 30 June 2022is summarised in the table below (note that this is summarised on a per unit basis):Financial information for the 30 June 2022 financial yearSelling priceDirect materialsDirect labour (R160 per hour)Variable marketing and distribution costsFixed marketing and distribution costsActual production and sales in unitsLaptopR15 000R4 500R1 920R800R600900Budget information for the 30 June 2023 financial yearExpected production and sales in unitsiPodR2 000R400R320Macro Hardware Limited adopted just-in-time method and does not keep inventory of laptops oriPods. Also, there is no opening or closing work-in-progress or raw materials for both products.R200R1002700Direct labourers used in the manufacturing of the products signed fixed-term contracts with thecompany so that they can be paid for both idle and production hours. Labourers were operating atfull capacity during the 30 June 2022 financial year - hence the possible expansion need.Fixed marketing and distribution costs have been allocated to units based on actual sales volumethat were sold during the 2022 financial year. The laptop and iPod prices are dictated by the marketand Macro Hardware Limited does not have much room to increase the selling prices. The expectedproduction and sales in units for the 30 June 2023 financial year is as follows:Laptop800iPod2 400The total fixed manufacturing overheads costs for the 2022 financial year was R7 650 000 and it isexpected to remain the same in the 2023 financial year. Fixed manufacturing overhead costs arecurrently allocated to production based on the number of direct labour hours.REQUIRED1. Determine the margin of safety units for Macro Hardware Limited in the financial year ending30 June 2023 assuming the expected sales mix remains constant.

Given in the question: Information for the year which end on 30 June 2022 Laptop…

Answered: 1. Determine the margin of safety units…

1. Determine the margin of safety units for Macro Hardware Limited in the financial year ending 30 June 2023 assuming the expected sales mix remains constant.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 14E: Global Reach, Inc., is considering opening a new warehouse to serve the Southwest region. Darnell...

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Macro Hardware Limited manufactures two types of products, a laptop and an iPod and sells them in a very competitive market. Both products are funky light-weight products that are designed for the 15- to 25-year-old age group market. Due to the popularity of their products, Macro Hardware Limited is considering expanding into different target markets during the next financial year that commences on 1 July 2022. However, management wish to first evaluate the risk and expected profitability of the existing target market for 2022 before embarking on these new endeavours. Management has requested that the financial accountant collect all the relevant financial information relating to the two products for the 2022 financial year and prepare a budget for them for 2023. The financial accountant is not sure how to allocate some of the cost between the two products, but all the other relevant budget information relating to the two products for the financial year ending 30 June 2022 is…
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Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth of 65 prototype chips per year through 2024. That is, demand will be 615 in 2018, 680 in 2019, 745 in 2020, and so on. The plant cannot produce more than 585 prototype chips annually. To meet future demand, Dublin Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,200,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available:…
Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth of 65 prototype chips per year through 2024. That is, demand will be 615 in 2018, 680 in 2019, 745 in 2020, and so on. The plant cannot produce more than 585 prototype chips annually. To meet future demand, Dublin Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,200,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available:…
Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth of 65 prototype chips per year through 2024. That is, demand will be 615 in 2018, 680 in 2019, 745 in 2020, and so on. The plant cannot produce more than 585 prototype chips annually. To meet future demand, Dublin Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,200,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available: Modernize…
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