Question 1 AlRashid Custom Lights LLC of Ras Al Khaimah manu

Question 1 Al-Rashid Custom Lights LLC, of Ras Al Khaimah, manufactures qual electric light bulbs for distribution world-wide. Relevant costs are as follows - Sa . Silica for glass fabrication-AED 2.50 per bulb x235 . Lime and Sodium Carbonate AED 0.20 per bulb .Copper, for contacts AED 1.50 per bulb Tungsten for filaments AED 1.00 per bulb Utilities (electricity water, telephone etc)-AED 7.900 per month . Pactory rent and business insurance AED 6,500 per month Wages for casual plant operators-AED 17 50 per bulb .\' Salaries for permanent staff- AED 145,800 per month The number of light bulbs manufactured in January 2012 was quantities increased by 10% of this value each month, for the months February to December 2012 and production Each light bulb was sold at AED 27.50 to dealers, and you may assume that all items manufactured were sold (that is, closing inventories were zero each month) Sketch a worksheet layout that- a) Displays Fixed, Variable and Total costs for each month (20 marks) b) Displays the sales volume for each month required to break even (20 marks) Your worksheet sketch should indicate what types of content the cells will hold (data, functions or formulae) and what types of cell references (absolute or relative). An additional 10 marks will be given for clearly laid out worksheets

Solution

As Variable cost varies with no. of units produced, therefore the cost given in the question which change with the production of each bulb will be variable cost (i.e. per bulb costs) and as Fixed costs are period costs and remain fixed over a period of time, therefore the cost given in the question for each month will be fixed costs (i.e. per month costs)

Total Variable cost per bulb = 2.50+0.20+1.50+1.00+17.50 = AED 22.70 per bulb

Total Fixed cost per month = 7,900+6,500+145,800 = AED 160,200 per month

Each month increase in bulbs production = 235,500*10% = 23,550

a) Worksheet showing Fixed, Variable and Total Cost (Amounts in AED)

b)  Contribution Margin per bulb = Sale price per bulb - Variable cost per bulb

= AED 27.50 - AED 22.70 = AED 4.80

Total Fixed cost per month = AED 160,200

Break even sales volume for each month = Total Fixed cost/Contribution margin per bulb

= AED 160,200/AED 4.80 = 33,375 bulbs

Therefore, 33,375 bulbs are required to be sold each month for break even

Month	Bulbs manufactured and sold (i) (increase by 23,550 each month)	Variable cost per bulb (ii)	Total Variable cost [(iii) = (i)*(ii)]	Total Fixed cost (iv)	Total Cost [(v) = (iii)+(iv)]
January	235,500	22.70	5,345,850	160,200	5,506,050
February	259,050	22.70	5,880,435	160,200	6,040,635
March	282,600	22.70	6,415,020	160,200	6,575,220
April	306,150	22.70	6,949,605	160,200	7,109,805
May	329,700	22.70	7,484,190	160,200	7,644,390
June	353,250	22.70	8,018,775	160,200	8,178,975
July	376,800	22.70	8,553,360	160,200	8,713,560
August	400,350	22.70	9,087,945	160,200	9,248,145
September	423,900	22.70	9,622,530	160,200	9,782,730
October	447,450	22.70	10,157,115	160,200	10,317,315
November	471,000	22.70	10,691,700	160,200	10,851,900
December	494,550	22.70	11,226,285	160,200	11,386,485