Azure Ltd produces confectionery and is considering extending their product range to include biscuits, crackers and crisps. They could either buy in products made to their specification or manufacture the products in-house. If they manufacture them they would have to buy additional equipment for each product range. All manufactured products would be charged with 12% of sales revenue to cover the overheads of the business. Use the data in the table below to assess whether each product range should be bought in or manufactured in-house: Biscuits 1,100,000 1,500,000 Crisps 2,100,000 Crackers Sales demand per annum (in number of units) Sales price per 100 units Equipment cost Bought-in price per 100 units Raw materials per 100 units Variable labour costs per 100 units Distribution cost per 100 units Allocation of overhead – 12% of sales (per 100 units) £155 £220 £90 £260,000 £375,000 £130,000 £98 £170 £68 £32 £60 £25 £25 £60 £15 £15 £30 £11.75 £18.60 £26.40 £10.80
Azure Ltd produces confectionery and is considering extending their product range to include biscuits, crackers and crisps. They could either buy in products made to their specification or manufacture the products in-house. If they manufacture them they would have to buy additional equipment for each product range. All manufactured products would be charged with 12% of sales revenue to cover the overheads of the business. Use the data in the table below to assess whether each product range should be bought in or manufactured in-house: Biscuits 1,100,000 1,500,000 Crisps 2,100,000 Crackers Sales demand per annum (in number of units) Sales price per 100 units Equipment cost Bought-in price per 100 units Raw materials per 100 units Variable labour costs per 100 units Distribution cost per 100 units Allocation of overhead – 12% of sales (per 100 units) £155 £220 £90 £260,000 £375,000 £130,000 £98 £170 £68 £32 £60 £25 £25 £60 £15 £15 £30 £11.75 £18.60 £26.40 £10.80
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 1PB: Variety Artisans has a bottleneck in their production that occurs within the engraving department....
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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