Reference no: EM133154779

Question - Alaba Ltd, a newly established company specialising in the production of lightweight products for the aerospace industry, has developed a new component for aircraft fuselages (the 'BRJ1000') based on a newly developed light material. At a recent trade fair, Dom-Barbier Plc expressed an interest in purchasing 30 units of BRJ1000, provided that Alaba Ltd could provide them at a selling price of £63,000 per unit, and within 20 weeks of agreeing the contract.

Alaba's Ltd's management accountant has provided the following information on production costs relating to the BRJ1000 component:

Sheet plastic per unit £3,470

Purchased components per unit £6,300

Other direct production expenses per unit £1,650

Allocated fixed overhead expenses per unit £38,250

Direct labour per hour (up to 40 hours per week) £30

Direct labour per hour (over 40 hours per week) £40

As this is a relatively new product, the management accountant expects the total labour hours required to produce each unit of BRJ1000 to fall as the workforce gain more experience. Based on a previous product, he estimates that it will take 1,800 hours to produce the first unit of BRJ1000, 2,880 hours to produce the first two units, and 4,608 hours to produce the first four units. He expects this pattern to continue up to and beyond the 30th unit.

Normal working hours are 40 hours per week, and Alaba Ltd has 20 operatives available for manufacturing BRJ1000 components. These operatives have indicated that they are willing to work overtime at the rate shown above.

What is the % learning for the BRJ1000 unit?

How many hours will it take to make the 30 BRJ1000s?

How much will the labour cost to make the 30units?

What is the total variable cost of one unit of BRJ1000, if the order is delivered on time?

What is the average contribution of one unit of BRJ1000, if the order is delivered on time?