Menai Ltd
Subject:BusinessPrice:2.87 Bought7
Menai Ltd. manufactures a number of different products and has recently employed Sally Rushton as its management accountant. Sally is currently looking at the various products and processes within Menai Ltd. to increase profitability, as a measure to try to avoid redundancies. Sally has identified 4 areas that she would like to look at first and she has asked you to provide her with the following information.
Menai Ltd. manufacture the Picola which it sells for £50 a unit. The direct material cost is £15 per unit. Other factory costs are £50,000 each month. The bottleneck factor of the production is the assembly of the unit, which is a labour-intensive process. There are 12,500 labour hours available in assembly each month. Each unit of the Picola takes 4 hours to assemble.
Calculate the Picola's budgeted rate per factory hour and through put ratio for the month
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Answer:
Calculation of budgeted rate per factory hour:
| Particulars | Amount |
| Factory Costs/overheads in the month (A) | £50,000 |
| Total labour hours available in the month (B) | 12,500 |
| Budgeted rate per factory hour (A)/(B) | £ 4 |
Therefore, budgeted rate per factory hour is £ 4
Calculation through put ratio:
Through put is given by (R) = I/T
Where (R) = Rate of flow called throughput, which means the number of units that go through a process per unit of time.
I = Inventory, i.e the number of units that can be produced.
In this case, Total labour hours available = 12,500
Assembly time for 1 unit = 4 hours
Therefore, Inventory (I) = 12,500/4 = 3,125 units.
(T) = Time a unit spends from beginning of the process till its end.
In this case, T = 4 hours
Therefore, through put ratio = I/T = 3,125/4 = 781.25
Therefore, Through put ratio = 781.25 units/hour
