Standard Costing

emanneh

Task 3

Global Components Ltd is has a contract to produce 175,000 units in the coming year.

Each unit takes 0.25 labour hours and requires 6 kg of raw material. The supplier can supply 1,000,000kg of raw material during the year.

There are 25 production workers. Each worker works 1,700 hours per year in normal time.

4% of the raw material is wasted during the production process.

Complete the table below by inserting the correct figures.

In normal time, how many units can the production workers produce?

How many hours of overtime are needed?

How many units can be made with the material available?

How much material will it be necessary to source from elsewhere?

emanneh

Hi please can one assist me on this question

shamilkaria

Hi @emanneh

I hope you are well?

I can't see the table but will give it a shot

175,000 units contracted for next year

Labour Hours - 0.25 (hours) x 175,000 units = 43,750 hours required

Each Unit requires 6kg = 6kg x 175,000 units = 1,050,000kg in total

The supplier can only provide - 1,000,000kg which means we are 50,000kg short - (1.050,000kg - 1,000,000kg). This doesn't take into consideration the 4% wastage. If we consider 4% wastage the total materials required would be 1,050,000kg / 0.96 (4% wastage) = 1,093,750kg. This is the total amount required if we consider the 4% wastage. Because of you did 4% of 1,093,750kg that would be 43,750kg. So 1,093,750kg - 43,750kg = 1,050,000kg

25 production workers are available each one works 1,700 normal hours. So normal hours in the year will be 25 workers x 1,700 normal hours = 42,500 hours. However earlier we worked out that the labour Hours required to make 175,000 units was 43,750 hours. So this means that we need 43,750 hours - 42,500 hours = 1,250 additional hours of overtime

Additional raw materials required from another supplier would be 1,093,750kg - 1,000,000kg = 93,750kg required from another supplier.

If we only only had 1,000,000kg and 4% is wasted that means we only have 960,000kg available to use. This comes from 1,000,000kg x 4% = 40,000kg wasted. So 1,000,000kg - 40,000kg = 960,000kg. Now each unit requires 6kg so we will do 960,000kg / 6kg = 160,000 units can be produced based on what raw materials we have.

Do let me know if this is correct if not I can look into it further. If it is correct I hope this explanation has helped you out.

Kind regards

Shamil