Please answer this question stated below please. Thank you WorldExplorer is a ca
ID: 2528739 • Letter: P
Question
Please answer this question stated below please. Thank you
WorldExplorer is a car manufacturer manufactures small sized cars. Their accountant have collected the cost data for the past 4 months in 2017. All the employees, except supervisors and admin staff, working on their production line is paid by number of working hours. According to the industry agreement with the union, there would be an increase on supervisor's salary in Dec 2017. Their delivery company-Punctual charged them a base rate and car handling cost for each car they delivered. The rental cost would also increase in Dec 2017. All cost changes happened in Dec 2017 will stay effective in the future.
The accountant of WorldExplorer also prepared a budget (displayed below) for the company for its operation from Jan 2018 to April 2018. The accountant advises you following points:
* Unit cost remain unchanged
* Manufacturing fixed and variable overhead costs are allocated based on number of production
*The company keeps 5% of each month's projected sales volume as the ending inventory
WorldExplorer's accountant noticed every month 50% cars are purchased by cash and another 50% is credit sale. Money for credit sales is collected in the following pattern. 60% of the credit sales amount will be collected in the month of sale, 37% will be collected in the following month and 3% is uncollectable. On the 1st of Jan, account receivable from Dec's sale is 4000000.
Using the information given, answer the following questions. Show your calculations.
1. what is the cost function for WorldExplorer?
2. If they would manufacture 2200 cars in Jan 2018, what is the total cost?
3. Prepare Cost of Goods Sold Budget for Feb 2018
4. Prepare Cash receipts (inflow) budget for each month in the first quarter.
Explanation / Answer
1. Raw material cost = variable cost = 500
Administration and sales= Change in total Cost/ change in production volume
= 5 variable cost
& 300000 fixed cost
Direct labour = variable cost= 3000
Supervisior salary= fixed= 22000
Product delivery
10 variable
&300000 fixed
Rent= fiXed= 250000
2. Production=2200 cars
Budgeted data from jan to april is not available. HENCE , I am unable to provide the answer for 3, 4 question
However i will explain the method to compute the requirement for your ease .
Cost of goods sold = Sales + closing stock -opening stock
Where closing stock =5% of projected sales of next month
E.g for preparing budget of jan, closing stock =5% of sales of feb.
For cash recipts
Follow the procedure
Happy Learning :)
Particular Amount Raw material cost (500*2200) 1100000 Administration and sales {(5*2200)+300000} 311000 Direct labour {3000*2200} 6600000 Supervisor salary 22000 Product delivery {(10*2200)+300000} 322000 Rent 250000 Total cost 18505000