Alexander Gentles Ltd manufactures a single product. For the month of November 2016, the company sold 6,000 units of the product at $500 each. At the start of November there were 460 units in store, while on November 30, 2016 inventory on hand was counted to be 630 units. The company has a budgeted capacity of 6,800 units. The following table shows cost information for the product that was extracted from the company’s accounting records. Cost per unit Details $ Direct materials 90 Direct labour 80 Production overheads 60 230 Administrative and selling overheads for November 2016 were budgeted at $350,000 and 280,000 respectively. The company’s records also revealed that sixty percent (60%) of the production overheads were fixed. Required: What was the marginal cost per unit for November 2016? Find the contribution margin per unit for November 2016. Calculate profit for November 2016 using marginal costing techniques.
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.
Alexander Gentles Ltd manufactures a single product. For the month of November 2016, the company sold 6,000 units of the product at $500 each. At the start of November there were 460 units in store, while on November 30, 2016 inventory on hand was counted to be 630 units. The company has a budgeted capacity of 6,800 units. The following table shows cost information for the product that was extracted from the company’s accounting records.
Cost per unit
|
Details |
$ |
|
Direct materials |
90 |
|
Direct labour |
80 |
|
Production |
60 |
|
|
230 |
Administrative and selling overheads for November 2016 were budgeted at $350,000 and 280,000 respectively. The company’s records also revealed that sixty percent (60%) of the production overheads were fixed.
Required:
- What was the marginal cost per unit for November 2016?
- Find the contribution margin per unit for November 2016.
- Calculate profit for November 2016 using marginal costing techniques.
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