Manufacturing – Knowsia

SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

Question

(a) You have been recently employed as a Finance Manager of a large manufacturing company. At its first management meeting, the Director of Finance presented information on management’s intention to takeover one of the company’s key suppliers. An old school friend of yours works as an accountant for the targeted company. The Finance Director knows and has asked you to try and find out anything that might help the takeover, but it must remain confidential.

Required:
Identify and explain THREE fundamental ethical principles that could be breached in the above scenario. (b) Corporate social responsibility (CSR) requires that organizations give back to the society by way of investing part of their profits in socio-economic activities of their host communities. Companies adopt different strategies to realizing their CSR obligations to the host communities.

Required:
Identify and explain FOUR strategies for managing Corporate Social Responsibility in organizations.

Answer

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Tags: Conflict of Interest, Corporate Social Responsibility, Ethics, Manufacturing, Professional conduct
Level: Level 3

Topic: Ethics and social responsibility

FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

Question

Tamasi Manufacturing was formed on 1 January 20X5. The entity manufactures and sells a single product and values it on a first-in, first-out basis.
One tonne of raw material is processed into one tonne of finished goods.
The following details relate to 20X5.

Purchases of raw materials
Purchases:
Price: GH¢100,000 per tonne on 1 January, increasing to GH¢150,000 per tonne on 1 July
Import duties: GH¢10,000 per tonne
Transport from docks to factory: GH¢20,000 per tonne

Production costs
Production capacity: 1,000 tonnes of raw materials per week
Variable costs: GH¢25,000 per tonne
Fixed costs: GH¢30,000,000 per week
Sales details
Selling price: GH¢240,000 per tonne
Delivery costs to customers: GH¢8,000 per tonne
Selling costs: GH¢4,000 per tonne

Inventories at 31 December 20X5
Raw materials: 2,000 tonnes
Finished goods: 2,000 tonnes

There is a ready market for raw materials and the NRV of the raw materials is higher than its cost.

Required
Calculate and disclose the value of inventories at 31 December 20X5 in accordance with IAS 2.

Answer

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Tags: Cost Valuation, FIFO, IAS 2, Inventories, Manufacturing, Net Realisable Value
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

MA – L2 – Q48 – Decision Making Techniques

Determine if BHIL should manufacture Zeta internally or buy it, given material constraints and government orders.

Question

Blue Horizon Industries Limited (BHIL) produces and markets three products viz. Alpha, Beta, and Gamma. Following information is available from BHIL’s records for the manufacture of each unit of these products:

	Alpha	Beta	Gamma
Selling price	GH₵ 66	GH₵ 106	GH₵ 124
Material-A (GH₵ 4 per kg)	GH₵ 8	GH₵ 12	GH₵ 12
Material-B (GH₵ 6 per kg)	GH₵ 12	GH₵ 24	GH₵ 24
Direct labour (GH₵ 10 per hour)	GH₵ 25	GH₵ 25	GH₵ 30
Variable overhead based on:
– Labour hours	GH₵ 1.8	GH₵ 1.5	GH₵ 1.8
– Machine hours	GH₵ 1.4	GH₵ 1.2	GH₵ 1.2
Total	GH₵ 3.2	GH₵ 2.7	GH₵ 3.0
Other data:
Machine hours	7	6	6
Maximum demand per month (units)	3,000	3,000	5,000

Additional information:
(i) BHIL is also engaged in the trading of a fourth product Zeta, which is very popular in the market and generates a positive contribution. BHIL currently purchases 600 units per month of Zeta from a supplier at a cost of GH₵ 40 per unit. In-house manufacture of Zeta would require: 2.5 kg of material-B, 1 hour of direct labour, and 2 machine hours.
(ii) Materials A and B are purchased from a single supplier who has restricted the supply of these materials to 22,000 kg and 34,000 kg per month respectively. This restriction is likely to continue for the next 8 months.
(iii) BHIL has recently accepted a Government order for the supply of 200 units of Alpha, 300 units of Beta, and 400 units of Gamma each month for the next 8 months. These quantities are in addition to the maximum demand stated above.
(iv) There is no beginning or ending inventory.

Required:
Determine whether BHIL should manufacture Zeta internally or continue to buy from the supplier during the next 8 months.

Answer

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Tags: Contribution Analysis, fixed costs, Government Order, Make or Buy, Manufacturing, Material Scarcity, Production Planning, Profit Maximization, Resource Constraints, variable costs
Level: Level 2

Topic: Decision making techniques

MA – L2 – Q47 – Decision Making Techniques

Establish production plan to maximize profit with steel limited to GH₵250,000, prioritizing a major customer's order.

Question

An engineering company has been experiencing problems with restricted availability of resources. The company manufactures a variety of casings. It makes four types of casing. Each casing requires the same bought-in component and some high-grade steel. The standard costs for the four types of casing are as follows:

Casing	A	B	C	D
	GH₵	GH₵	GH₵	GH₵
Steel	250	500	190	390
Bought-in component	50	50	50	50
Direct labour	60	60	50	100
Variable production costs	40	50	40	50
Fixed production costs	180	240	150	270
Selling and administration costs	145	225	120	215
Profit	35	55	30	55
Selling price	760	1,180	630	1,130

All the selling and administration costs are fixed and the same single component is used for each of the four products. Direct labour is paid GH₵8 per standard hour and each member of the workforce is capable of producing any of the casings.
The company’s main customer has ordered 30 units of Casing A, 20 units of B, 30 units of C, and 20 units of D for production and delivery in the next month. Senior management have agreed that this order should be treated as a priority order and that these casings must be manufactured and delivered to the customer next month. This is necessary to maintain the goodwill of the customer. It is estimated that this order represents 10% of the total demand next month for each type of casing.
The company operates a just-in-time system, and has no inventories of steel, components, or finished goods.
Required:
If the aim is to maximise profit for the month, establish the production and selling plan for the company next month in the following situation:
(a) Situation 1. Supplies of steel are limited to GH₵250,000.

(b) Situation 2. Only 400 bought-in components are available from suppliers.

(d) Situation 4. A labour dispute restricts available productive labour hours in the month to 2,125; but the manufacture of any quantities of the four casings could be sub-contracted to an outside supplier. The cost of buying the casings externally would be GH₵475, GH₵705, GH₵380, and GH₵640 for Casing A, Casing B, Casing C, and Casing D respectively. In addition, it should be assumed that the major customer insists that its order is completed by the company itself and the manufacture should not be subcontracted.

Answer

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Tags: Contribution Analysis, fixed costs, Manufacturing, Priority Orders, Production Planning, Profit Maximization, Resource Constraints, Shortages, Steel Limitation, variable costs
Level: Level 2

Topic: Decision making techniques

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

Question

Ouluto Limited (OUL) is engaged in the manufacture and sale of three products viz. WBA, QPR and SC. The following information is available from OUL’s records for the month of February 20X9:

	WBA	QPR	SC
Sales price per unit (GH₵)	2,300	1,550	2,000
Material cost per Kg. (GH₵)	250	250	250
Labour time per unit (Minutes)	20	30	45
Machine time per unit (Hours)	4	2.5	3
Net weight per unit of finished product (Kg.)	6	4	5
Yield (%)	90	95	92
Estimated demand (Units)	10,000	20,000	9,000

Each worker is paid monthly wages of GH₵15,000 and works a total of 200 hours per month. OUL’s total overheads are estimated at 20% of the material cost.
Fixed overheads are estimated at GH₵5 million per month and are allocated to each product on the basis of machine hours. 100,000 machine hours are estimated to be available in February 20X9.
Required:
Based on optimum product mix, compute OUL’s net profit for the month of February 20X9.

Answer

Find Related Questions by Tags, levels, etc.

Tags: contribution margin, fixed costs, Machine Hours, Manufacturing, Net profit, Optimal production, Product mix, Profit Maximization, Resource Allocation, variable costs
Level: Level 2

Topic: Decision making techniques

Tag (SQ): Manufacturing

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SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

MA – L2 – Q48 – Decision Making Techniques

Determine if BHIL should manufacture Zeta internally or buy it, given material constraints and government orders.

MA – L2 – Q47 – Decision Making Techniques

Establish production plan to maximize profit with steel limited to GH₵250,000, prioritizing a major customer's order.

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

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SCS – L3 – Q39 – Ethics and social responsibility

Identify ethical principles breached in a scenario involving a takeover and confidentiality request.

You're reporting an error for "SCS – L3 – Q39 – Ethics and social responsibility"

FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

You're reporting an error for "FR – L2 – Q18 – Inventories"

MA – L2 – Q48 – Decision Making Techniques

Determine if BHIL should manufacture Zeta internally or buy it, given material constraints and government orders.

You're reporting an error for "MA – L2 – Q48 – Decision Making Techniques"

MA – L2 – Q47 – Decision Making Techniques

Establish production plan to maximize profit with steel limited to GH₵250,000, prioritizing a major customer's order.

You're reporting an error for "MA – L2 – Q47 – Decision Making Techniques"

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

You're reporting an error for "MA – L2 – Q46 – Decision making techniques"

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