HU Cost Behavior Methods For Start Ups Questions

A.    (CLO 2)

As a start-up / ‘new’ manufacturer, one of your tasks as the Operations Manager is to identify the behaviour of manufacturing costs to develop a production cost budget. You know three methods can be used to identify cost behaviour from past data, but past data are not available because this is a start-up.

Identify and compare the three known methods of measuring cost behaviour.  (3 marks)

B.    (CLO 4)

Matt Ltd is currently preparing the production budget for steering wheel covers and the material purchases budget for plastic for the upcoming year. Each unit of steering wheel cover requires 5kg of plastic material.

–       The anticipated opening stock of steering wheel cover is 5,000 units

–       Matt Ltd wishes to increase the closing stock of steering wheel covers by 30% by the end of the year

–       The anticipated opening stock for plastic material is 50,000 kg and in order to avoid stock-outs the required closing stock has been increased to 60,000 kg.

–       The Sales manager confirmed expected sales of 70,000 units of steering wheel covers.

a.    How many units of steering wheel cover will need to be produced? (show           workings) (3 marks)

b.     What will be the purchases budget for plastic material in kg? (show                      workings)