Question 1 Al-Rashid Custom Lights LLC, of Ras Al Khaimah, manufactures qual ele
ID: 2609379 • Letter: Q
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Question 1 Al-Rashid Custom Lights LLC, of Ras Al Khaimah, manufactures qual electric light bulbs for distribution world-wide. Relevant costs are as follows - Sa . Silica for glass fabrication-AED 2.50 per bulb x235 . Lime and Sodium Carbonate AED 0.20 per bulb .Copper, for contacts AED 1.50 per bulb Tungsten for filaments AED 1.00 per bulb Utilities (electricity water, telephone etc)-AED 7.900 per month . Pactory rent and business insurance AED 6,500 per month Wages for casual plant operators-AED 17 50 per bulb .' Salaries for permanent staff- AED 145,800 per month The number of light bulbs manufactured in January 2012 was quantities increased by 10% of this value each month, for the months February to December 2012 and production Each light bulb was sold at AED 27.50 to dealers, and you may assume that all items manufactured were sold (that is, closing inventories were zero each month) Sketch a worksheet layout that- a) Displays Fixed, Variable and Total costs for each month (20 marks) b) Displays the sales volume for each month required to break even (20 marks) Your worksheet sketch should indicate what types of content the cells will hold (data, functions or formulae) and what types of cell references (absolute or relative). An additional 10 marks will be given for clearly laid out worksheetsExplanation / Answer
As Variable cost varies with no. of units produced, therefore the cost given in the question which change with the production of each bulb will be variable cost (i.e. per bulb costs) and as Fixed costs are period costs and remain fixed over a period of time, therefore the cost given in the question for each month will be fixed costs (i.e. per month costs)
Total Variable cost per bulb = 2.50+0.20+1.50+1.00+17.50 = AED 22.70 per bulb
Total Fixed cost per month = 7,900+6,500+145,800 = AED 160,200 per month
Each month increase in bulbs production = 235,500*10% = 23,550
a) Worksheet showing Fixed, Variable and Total Cost (Amounts in AED)
b) Contribution Margin per bulb = Sale price per bulb - Variable cost per bulb
= AED 27.50 - AED 22.70 = AED 4.80
Total Fixed cost per month = AED 160,200
Break even sales volume for each month = Total Fixed cost/Contribution margin per bulb
= AED 160,200/AED 4.80 = 33,375 bulbs
Therefore, 33,375 bulbs are required to be sold each month for break even
Month Bulbs manufactured and sold (i) (increase by 23,550 each month) Variable cost per bulb (ii) Total Variable cost [(iii) = (i)*(ii)] Total Fixed cost (iv) Total Cost [(v) = (iii)+(iv)] January 235,500 22.70 5,345,850 160,200 5,506,050 February 259,050 22.70 5,880,435 160,200 6,040,635 March 282,600 22.70 6,415,020 160,200 6,575,220 April 306,150 22.70 6,949,605 160,200 7,109,805 May 329,700 22.70 7,484,190 160,200 7,644,390 June 353,250 22.70 8,018,775 160,200 8,178,975 July 376,800 22.70 8,553,360 160,200 8,713,560 August 400,350 22.70 9,087,945 160,200 9,248,145 September 423,900 22.70 9,622,530 160,200 9,782,730 October 447,450 22.70 10,157,115 160,200 10,317,315 November 471,000 22.70 10,691,700 160,200 10,851,900 December 494,550 22.70 11,226,285 160,200 11,386,485Related Questions
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