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MAC3701 ECP ASSIGNMENT 2 - SEMESTER 1 OF 2021
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MAC3701 ECP ASSIGNMENT 2 - SEMESTER 1 OF 2021
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MAC3701 ECP ASSIGNMENT 2 – SEMESTER 1OF 2021
QUESTION 1
(a) Business concerns
(i) Universal are incapacitated to carry out their duties due to incompetence as
they have inadequate qualifications and incapability caused by the high staff
turnover and inadequate staff numbers.
(ii) Universal are not professional and do not exercise due care as shown by
losing the company`s files which was stated to be a common occurrence.
(b) Calculation of corrected selling price
Day Night
R R
Basic ingredients 50 50
Sunscreen 12 -
Anti – ageing ingredients - 22
Variable manufacturing overheads 10.50 10.50
Empty bespoke acrylic jars, shrink – wrap and labels 35 35
50 30 30
Direct labour (3 ∗ 10 ∗ 2)
(1 970 000 − 720 000)
Variable distribution costs [ (300 000 + 200 000) ] 2.50 2.50
Contribution per unit [(
31 050 000
);(
50 850 000 − 31 050 000
) 115 110
270 000 180 000
Selling price per pack 255 260
Calculation of the corrected total budgeted sales
Product Number of Selling price Total sales
packs per pack
Packs R R
Day 300 000 255 76 500 000
Night 200 000 260 52 000 000
Total sales amount 128 500 000
, (c) Sales mix = 𝟑: 𝟐
Contribution per batch = [(3 ∗ 130) + (2 ∗ 115)]
= 𝑹𝟔𝟐𝟎 𝒑𝒆𝒓 𝒃𝒂𝒕𝒄𝒉
𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕𝒔
Break – even (batches) = 𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝒑𝒆𝒓 𝒃𝒂𝒕𝒄𝒉
(50 850 000 – 1 900 000)
=[ ]
620
= 𝑹𝟕𝟖 𝟗𝟓𝟏. 𝟔𝟏 𝒃𝒂𝒕𝒄𝒉𝒆𝒔
Break – even units
Day = (78 951.61 ∗ 3)
= 𝟐𝟑𝟔 𝟖𝟓𝟓 𝒖𝒏𝒊𝒕𝒔
Night = (78 951.61 ∗ 2)
= 𝟏𝟓𝟕 𝟗𝟎𝟑 𝒖𝒏𝒊𝒕𝒔
𝟐∗𝑼∗𝑶
(d) Economic order quantity =√ 𝒉 + 𝒊𝑷
2 ∗ (300 000 + 200 000) ∗ 2 ∗ 410
= √[(10% ∗ 26.50) + 3.90 + (8% ∗ 26.50)]
= 𝟗 𝟕𝟐𝟓 𝒖𝒏𝒊𝒕𝒔
2 250 000
Purchase price =( ∗ 1.06) = 𝑹𝟐𝟔. 𝟓𝟎 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕
90 000
R
(300 000 + 200 000) ∗ 2 42 159.38
Ordering cost [ ∗ 410]
9 725 42 157.88
9 725
Holding cost [ 2 ∗ [(10% ∗ 26.50) + 3.90 + (8% ∗ 26.50)]
Total inventory cost 84 317.26
Conclusion
The company should adopt the economic order quantity model as this will save R10
682.74 (95 000 − 84 317.26) in inventory management costs
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