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Registered Posts: 21 New contributor 🐸
I'm stuck on this task, cannot figure out how to calculate the marginal cost of production when they have stock for finished product and raw material.

Sales data units of Exe unit of Wye

Budgeted sales for period 1 3200 2344
20 days ending 26 Jan

Budgeted sales for period 2 3000 2500
20 days ending 23 Feb

stock data

The opening finished stocks for period 1 will be 140 Exes and 184Wyes
Closing finished stocks of Exe for period 1 must equal 2 days sales in period 2
Closing finished stocks of Wye for period 1 must equal 4 days sales in period 2.
There is no stock of work in progress at any time.

Faulty production
4% of Exe finished production and 5%of Wye finished production is faulty and has to be destroyed .This faulty has no value.

Data
Exe and Wye use the same material.
Each Exe requires 6 kilos of material
Each Wye requires 8 kilos of material
The material costs £20 per kilo
The stock of material at the beginning of period 1 will be 2000 kilos
The stock of material at the end of period 1 will be 2400 kilos.

Exe and Wye use the same type of labour.
Each Exe requires 8 labour hours
Each Wye requires 5 labour hours
In any 20 days period ,the workforce can work up to 40,000labour hours before overtime
The normal labour rate is £6 per hour
The maximum overtime the employees in Solden can work is 4,000 labour hours
If any overtime is worked ,the labour rate is £9 per hour

Data

Solden uses marginal costing when preparing reports for directors.
Any idle time or overtime is charged to fixed overheads.
The budgeted selling price for each Exe is £200
The budgeted selling price for each Wye is £250
The opening stocks of 140Exes , 184Wyes and 2000 kilos of materials have the same unit cost as in period 1.

Prepare the following statements for period 1:
a) the budgeted marginal cost of production for each product
b) the unit cost of faulty-free production for each product
c) a budgeted operating statement showing for each product the total turnover, total expenses and total contribution

• Registered Posts: 21 New contributor 🐸
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Hope Sandy could see this tonight.
• Registered, Moderator Posts: 2,034 mod
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I used this question for several revision courses, but decided not to use it for the forthcoming exams. It was simply a lack of time, nothing wrong with the question.

Look at the material and labour costs on a per unit and then multiply by the units produced.

On the attached word doc, this part of the question is athe bottom of page 1

I've copied it into word from excel
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 21 New contributor 🐸
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Thank you Sandy!