Chineke & Sons manufacture a single product. The following is the statement for the year ended 30 April 2019, in which only 75% of the normal production capacity was utilized.
|Sales at N$250 per unit||3 000 000|
|Less: Production costs||(1 872 000)|
|Direct material||792 000|
|Direct labour||240 000|
|Variable overheads||240 000|
|Fixed overheads||600 000|
|Gross profit||1 128 000|
|Less: Selling and administration costs||(560 000)|
|Sales commission (12% of sales)||(360 000)|
|Net profit||568 000|
Budget for 2019 – 2021:
During April 2020, management planned the budget and considered various alternatives for the year 1 May 2019 to 30 April 2021. The following conclusions were made; inter alia.
- All variable costs will increase by 5%.
- Sales could increase to 80% of the normal production capacity if the selling price is decreased by 10%.
For October 2020, a special order was received based on a selling price of N$140 per unit. The following information is applicable to this order if it is accepted:
- The company will increase production to 80% of the normal capacity, 50% of the remaining capacity will be utilized by this order.
- The order must be delivered in equal monthly quantities during the year ending 30 April 2021.
- A temporary assistant to the production manager will have to be appointed at N$4 000 per month for the period to complete the order.
- A commission of only 3% in respect of this order will be payable to the sales manager.
Calculate the relevant salary to the assistant related to the special order
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