Peoria Moline

Selling Price 150 150

Variable Manufacturing Cost 72 96
Fixed Manufacturing Cost 30 15
Commission (5 %) 7.5 7.5
General and Admin Expense 25.5 21
Fixed Part 19 14.5
Variable Part 6.5 6.5
Total Unit Cost 135 139.5
Unit Profit 15 10.5
Production Rate/day 400 320
No of Days Working (Expected) 240 300
Part A
Beakeven
Breakeven Qty Of Peoria Breakeven Qty for Moline
Selling Price 150 150
Total Variable Cost 86 110
Total Fixed Cost 4704000 2832000
Breakeven Units 19932 10892
Part B
Operating Income
Peoria Moline
Revenue 14400000 14400000
Variable Cost
Variable Manufacturing Cost 6912000 9216000
Commission (5 %) 720000 720000
Admin Cost (Variable Part) 624000 624000
Contribution Margin 6144000 3840000
Fixed Cost
Manufacturing Cost 2880000 1440000
Admin Cost (Fixed Part) 1824000 1392000
Operating Income 1440000 1008000
Total Expected Sales 192000
Peoria Production 96000
Moline 96000
Managers Expectation
Cost @ 30000 units Cost Per Unit Cost @ 32000 units
Direct Material Cost 195000 6.5 208000
Direct Labor 120000 4 128000
Plant Space Rental 84000 84000
Equipment Leasing 36000 36000
Penelty for Equipment Leasing 0 0
Other Manufactring Over Heads 225000 231000
Variable Cost 90000 3 96000
Fixed Cost 135000 135000
Cost of Buying 32000 Units 0 0
Total Manufacturing Cost 660000 687000
Given Data Analysis at Current Rates
If there is no Increase in Material Cost as well as Direct Labour
Cost then we should not buy MTR-2000 from Marley, otherwise
we will be making a loss of 7600/year
Buying @ 17.30 Difference first Month Cost @32000 units Buying @ 17.30 Difference
0 208000 224640 0 224640
0 128000 134400 0 134400
0 84000 84000 0 84000
0 36000 36000 0 36000
6000 -6000 0 6000 -6000
135000 96000
0 96000 0 96000
135000 0 135000 135000 0
553600 -553600 0 553600 -553600
694600 -7600 710040 694600 15440
Analysis at Increased Rates Analysis at Current Rates
If there is no Increase in Material Cost as well as Direct Labour
Cost then we should not buy MTR-2000 from Marley, otherwise
we will be making a loss of 7600/year
If the material cost and labor cost is increased at
8% and 5% respectively the we will be making a
profit of $15440/year if we buy from Marley
Part A
Budgeted October Budgeted November Budgeted December Budgeted January
Labour Hr 1 0.99 0.98 0.97
Total Labor Cost
Labour Hrs Used
Labour Rate /hr 40 40 40 40
Units Produced
Actual December
1.002
424150
9980
42.5
10000
Part B
Direct Labour Actual Flexible
AI*AP*AS AI*AS*BP AS*BI*BP
425851.7034 400801.6 392040
Price Variance 25050.1 8761.603 Efficency Variance
December
Labour Efficency Varaince is 8761.603, which is lower than the Labor
Price Variance, this shows that performance of Labor is good.