Question 1: A produce products X Y Z sold to UK, China and Japan. Recently, A company aware of a supplier of these produ

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Question 1:
A produce products X Y Z sold to UK, China and Japan. Recently,
A company aware of a supplier of these products in India, they are
considering manufacture all the products themselves, or buy in
some, or all of them, from the supplier.
The projected sales and cost information are shown below:
Product
X
Y
Z
Sales volume
500
600
650
Sales Price per unit (£)
75
80
82
Material A kg per unit
4
2
3
Material A Price (£)
5
5
5
Material B kg per unit
5
3
4
Material B Price (£)
4
4
4
Labour Hours
3
5
5
Labour Rate (£)
6
6
6
Variable Overhead per unit (£)
7
6
5
Direct Expenses (£)
750
880
680
Supplier Price per Unit (£)
70
65
62
Total Fixed Overheads for the business
£15000
Required:
(a) Calculate the current Total Budgeted Profit for the
business, showing clearly the
Total Variable Cost, Total Marginal Cost, Total Contribution,
current Variable Cost per unit and the current Marginal Cost per
unit for each product.
State your advice to the management of A company as to whether
they should make or buy each product under the current cost
structure.
(b) If the volume of material purchases falls below a certain
level, price of materials will increase, as follows:
If quantity of Material A falls below 4000 kg:

5% increase in price
If quantity of Material B falls below 5000 kg:

2% increase in price
Recalculate the Total Budgeted Profit for the business under the
Make or Buy recommendation you gave in part (a), amending the
material costs where necessary.
(c) The management are considering an alternative option,
lowering the
sales price for all customers and increasing the volume of
sales:
X
Y
Z
Sales volume split: Internal
120
150
180
Sales volume split: China
180
200
280
Sales volume split: Japan
200
250
190
500
600
650
Volume increase %: Internal
0%
0%
0%
Volume increase %: China
10%
10%
10%
Volume increase %: Japan
12%
12%
12%
Price fall: Internal
0%
0%
0%
Price fall: China
5%
5%
5%
Price fall: Japan
3%
3%
3%
(i) Calculate the revised Sales volume and revenue
for the business .
(ii) Calculate the Total Budgeted Profit for the business,
amending based on the changed price and volume.
(d) Produce a summary table for the management of A
company, showing the
overall budgeted profit: under
the original cost structure in part (a)
under the Make or Buy recommendation you gave in part (b), with
material costs revised where necessary under the scenario where
sales prices are cut and sales volumes increased in part (c)
(ii).
Recommend to management which of these options should be taken
up, giving your reason.