1. Elegant Enterprises plc is currently operating at 80% of its machine capacity in the
manufacture of three different types of chair. The following information for each
product is available for the year ended Year 1.
Unit Information Basic Delux Super Delux
Selling Price £150 £200 £260
Variable Costs
– Materials £60 £80 £110
– Labour £40 £60 £80
– Variable Overheads ? ? ?
Machine Hours 2 hrs 5 hrs 5 hrs
Units Produced 5000 5500 6500
Variable overheads are charged to each product at the rate of £5 per machine hour.
Fixed costs are currently £450,000.
(a) Using the above information, calculate:
(i) the total number of machine hours currently being used by Elegant
Enterprises plc in Year 1;
(ii) the total profit being earned by Elegant Enterprises plc at the current level
of production.
In Year 2 Elegant Enterprises plc will work at full machine capacity and it is
anticipated that the demand for each of the 3 products will be:
Basic – 6,500 units
Delux – 7,500 units
Super Delux – 8,000 units
Fixed costs will rise by 20%.
(b) Using the information for Year 2, calculate:
(i) the number of machine hours available at full capacity;
(ii) the quantity of each product to be produced at full capacity if profits are
to be maximised;
(iii) Total Profit.
We Write Essays for Students
Tell us about your assignment and we will find the best writer for your paper
Get Help Now!At the start of Year 3 Elegant Enterprises plc plans to introduce a new product called
Ultimate Delux. The company will invest in new machinery, which will increase total
machine capacity by 20%. Fixed costs will rise by a further £45,000. Variable
overheads will be recovered at the same rate as in the previous 2 years. The
information per unit is as follows.
Selling Price £300
Material Cost £175
Labour £60
Machine hours 5 hours
Demand for the new product, Ultimate Delux will be 5,500 units, while the demand
for the other 3 products will remain the same as in Year 2.
(c) Calculate the maximum possible profit that could be earned during Year 3 by
Elegant Enterprises and advise the company whether or not it should introduce
the new product.
(d) During Year 4, a special order of 2,000 units of Ultimate Delux at a reduced price
of £280 per unit is being considered. The factory will continue working at full
capacity and demand for the company’s products will remain the same as
before. All other costs and prices remain unchanged. Calculate the new profit
and advise whether or not the special order should be accepted.
(e) Explain the meaning of the term opportunity cost.
PLACE THIS ORDER OR A SIMILAR ORDER WITH LITE ESSAYS TODAY AND GET AN AMAZING DISCOUNT
The post Elegant Enterprises plc is currently operating at 80% of its machine capacity in the manufacture of three different types of chair. The following information for each product is available for the year ended Year 1 appeared first on Cheapest Academic Custom Papers.
Welcome to originalessaywriters.com, our friendly and experienced essay writers are available 24/7 to complete all your assignments. We offer high-quality academic essays written from scratch to guarantee top grades to all students. All our papers are 100% plagiarism-free and come with a plagiarism report, upon request
Tell Us “Write My Essay for Me” and Relax! You will get an original essay well before your submission deadline.
