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Calculate the total overhead budget

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Question - Newton ltd manufactures two products

Product 1 Product 2

Sales in Units 3,000 4,500

Opening inventory is expected to be:

Product 1 500 units

Product 2 700 units

Management have stated their desire to reduce inventory levels and closing inventory budgeted as:

Product 1 200 units

Product 2 300 units

Two types of material are used in varying amounts in the manufacture of the two products. Material requirements are shown below:

Product 1 Product 2

Material M1 2kg 3kg

Material M2 3kg 3kg

The opening inventory of material is expected to be:

Material M1 4,300kg

Material M2 3,700kg

Management are keen to reduce inventory levels for materials levels for materials, and closing inventory levels are to be much lower. Expected levels are shown below:

Hours per unit Product 1 Product 2

Skilled labour 3 1

Semi-skilled labour 4 4

Skilled labour is to be paid at the rate of $9/hour and semi-skilled labour at the rate of $6/hour

Production overheads per labour hour are as follows:

Variable $3.50 per labour hour

Fixed $5.50 per labour hour

Required - Calculate the following:

a) The number of units of product 1 to be produced

b) The number of units of product 2 to be produced

c) The quantity of material M1 to be used

d) The quantity of material M2 to be used

e) The quantity of material M1 to be purchased and the value of the purchases

f) The quantity of material M2 to be purchased and the value of the purchases

g) The number of hours of skilled labour and the cost of this labour

h) The number of hours of semi-skilled labour and the cost of this labour

i) The total overhead budget

Reference no: EM132773423

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