Howzat Ltd has been selected as one of the preferred manufacturers of memorabilia cricket balls for the men’s and ladies T20 tournaments to be held globally over the next five years. You have been provided with the following cost information in order to determine whether it would be viable to go ahead with its manufacture. Howzat Ltd has three machines in its factory which can each produce 500 balls per month, however due to load shedding, each machine is only expected to operate at 75% of its original capacity. There are four weeks in a month. 1 Factory foreman’s salary per month, R35 000. 2 Each machine requires 2 operators who each work 35 hours per week. Machine operators are paid at a rate of R45 per hour. 3 750 mm (millimetres) of stitching is required per ball. Material required for the stitching is purchased in rolls at a cost of R80 per metre. 4 Rates and taxes are expected to amount to R125 000 per month. 5 Total depreciation on factory machines is calculated at R1 200 000 per annum. 6 Salesman’s commission is calculated at 5% of the selling price per ball. Each ball is expected to be sold for R125. All balls manufactured will be sold. 7 Special dye is required per ball. The dye is purchased in 5 litre tins and each tin has sufficient dye to manufacture 50 cricket balls. The cost per tin is R60. 8 Advertising and distribution costs amount to R5 000 per week. 9 150 grams (g) of cork is required to manufacture each ball. Cork is purchased from suppliers at a cost of R75 per kilogram (kg). REQUIRED: Calculate the number of cricket balls to be manufactured per month. Calculate the total variable costs per month. Calculate the total fixed costs per month.
Howzat Ltd has been selected as one of the preferred manufacturers of memorabilia cricket balls for the men’s and ladies T20 tournaments to be held globally over the next five years.
You have been provided with the following cost information in order to determine whether it would be viable to go ahead with its manufacture. Howzat Ltd has three machines in its factory which can each produce 500 balls per month, however due to load shedding, each machine is only expected to operate at 75% of its original capacity. There are four weeks in a month.
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1 |
Factory foreman’s salary per month, R35 000. |
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2 |
Each machine requires 2 operators who each work 35 hours per week. Machine operators are paid at a rate of R45 per hour. |
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3 |
750 mm (millimetres) of stitching is required per ball. Material required for the stitching is purchased in rolls at a cost of R80 per metre. |
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4 |
Rates and taxes are expected to amount to R125 000 per month. |
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5 |
Total |
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6 |
Salesman’s commission is calculated at 5% of the selling price per ball. Each ball is expected to be sold for R125. All balls manufactured will be sold. |
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7 |
Special dye is required per ball. The dye is purchased in 5 litre tins and each tin has sufficient dye to manufacture 50 cricket balls. The cost per tin is R60. |
|
8 |
Advertising and distribution costs amount to R5 000 per week. |
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9 |
150 grams (g) of cork is required to manufacture each ball. Cork is purchased from suppliers at a cost of R75 per kilogram (kg). |
REQUIRED:
- Calculate the number of cricket balls to be manufactured per month.
- Calculate the total variable costs per month.
- Calculate the total fixed costs per month.
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