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Lebo Ndlovu (“LN”) is has a small online fabric shop specialising in dressmakin...
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Lebo Ndlovu (“LN”) is has a small online fabric shop specialising in dressmaking fabrics. She sells two types of fabric, measured and sold per metre. She has asked for your assistance with the management accounting aspects of her business and provided you with the following budgeted information:
Details
|
Cotton
|
Premium Linen
|
Total
|
|
R
|
R
|
R
|
Annual Target Profit
|
|
|
120 000
|
Selling Price per meter
|
120
|
180
|
|
Fabric Purchase cost per meter
|
60
|
90
|
|
Labour cost per hour
|
48
|
48
|
|
Variable cutting and packaging cost per meter
|
8
|
12
|
|
Monthly shop rental
|
|
|
3 600
|
Monthly utilities
|
|
|
1 200
|
Monthly insurance
|
|
|
900
|
Monthly Website hosting
|
|
|
750
|
Additional Information:
· For every 1 metre of premium linen sold, LN expects to sell 3 metres of cotton fabric.
· Cotton Fabric requires 4 minutes of labour per meter, and Premium Linen Fabric requires 6 minutes of labour per meter
· Variable selling cost are 2,5% of the selling price
Assume the following additional information for question 3 only:
(i) Total annual fixed costs will be R80 000
(ii) The contribution for cotton will be R90 per unit and for Linen will R110 per unit
(iii) The sales mix is 4:2
(iii) All other information remains as given
In order to achieve the , LN must sell _________ meters of cotton and _________ meters of linen.