Manufacturing Profit Analysis
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chiedza MarimeManufacturing Profit Analysis
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chiedza MarimeA factory is currently working to 50% capacity and produces 10,000 units.
Estimate the profits of the
company when it works at 60% and 80% capacity and offer your critical comments.
At 50% working raw material cost increases by 2% and selling price falls by 2%. At the 80% working raw
material cost increases by 5% and selling price falls by 5%.
Also Check: Q. 2. Discuss the budgetary control limitations.
At 50% working the product costs $180 per unit and is sold at $200 per unit.
The unit cost of $180 is made up as follows:
Material: 100
Labor: 30
Factory overhead: 30 (40% fix)
Admn. overhead: 20 (50% fix)
Solution
Output: 10,000 unit 50% Output: 12,000 units 60% Output: 16,000 units
capacity capacity capacity
Per unit ($) Total ($) Per unit ($) Total ($) Per unit ($) To
Sales Value 200 20,00,000 196 23,52,000 190 30
Material Cost 100 10,00,000 102 12,24,000 105 16
Labor Cost 30 3,00,000 30 3,60,000 30 4,
Variable Factory
18 1,80,000 18 2,16,000 18 2,
Overhead
Fixed Factory Overhead 12 1,20,000 10 1,20,000 7.50 1,
Variable Admn.
10 1,00,000 10 120,000 10 1,
Overhead