Reference no: EM132817220
Question - Kombucha Kings produce two types of Kombucha, Lemon & ginger and Raspberry. The barrels require significant maintenance between batches and can be used only a few times.
The company currently uses a traditional costing system with total manufacturing overhead of $375,000 being applied to the two products according to their proportion of direct labour dollars. Assume that the following production and cost information for the most recent years:
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Lemon & ginger
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Raspberry
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Number of bottles produced
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200,000
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25,000
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|
Unit cost information
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|
|
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Direct materials
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$2.00
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$4.00
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Direct Labour
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$1.00
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$2.00
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Manufacturing overhead
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?
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?
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The company has conducted ABC analysis and traced the manufacturing overhead costs to four (4) activity pools, with the following cost drivers (see table below):
Activity Cost pools Total cost Amount of cost drivers
Purchasing and receiving $90 000 450 000 kilograms of raw materials
Setup for production $100 000 400 number of batches
Fermenting and aging $80 000 200 000 number of fermentation days
Quality control $105 000 20 000 number of inspections
Total $375 000
Below is the activity related information has been collected for each of the two products:
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Lemon & ginger
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Raspberry
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Kilograms of raw materials
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400,000
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50,000
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Number of batches
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200
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200
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Number of fermentation days
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30,000
|
170,000
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|
Number of inspections
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2000
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180,000
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Required -
1. Make a revenue budget for the coming month assuming it is 30 days long and the business is open 7 days per week. Show all workings.
2. If 60% of each month's sales revenue is collected in the month the sale is made and the remainder is collected in the following month. How much cash will you expected to be collected in the coming month. What additional assumptions will you need to make?
3. Identify three (3) possible ways the owner could increase total revenues. Discuss the pros and cons for each of your ideas.