ACCOUNTING ANALYSIS

Case Study - The Ergodesign Ltd.

Case Study - Ergodesign Ltd.

In this case study, the identification criteria of Ergodesing Ltd. the total production of the chairs is required around 40,320 direct labors in which 28,000 are required for machining hours. The total orders of these manufacturing chairs are 1,750 units in which 650 are into the production. The total number of hours are required for the production are; 450 along with the hours of inspection. The total staff for the organization is 36 in which 2 of 3 in production, storage, and the operations of delivery. And 1/3 of the remaining are required in Research and Development, finance, administration and sales and marketing. The selling price of the product is set £300 to £500. The wholesale price for the product is for a chair is around £195 (refer to appendix-A). The demand of chairs is set is around 1,800 units in the first starting year. The demand in the second and third year by the wholesaler is projected by the 20% increase after the first year.

Ergodesign preferred to purchase the CNC machine for the purpose of manufacturing large outputs in chairs in order to meet the demands of the wholesaler that will be required in the next three years. The cost of the CNC machine will be around 125,000 and the depreciation cost of the machine will be 12,500 as it will be wholly depreciated in the next 10 years. The cost of the maintaining of the production will be 5% of the capital cost annual (Finkler 2007, pp. 03-24).

The capacity of the production of chairs will be of 40 chairs per week in two batches of 20. For this p] purpose two additionally workers will be required.

The identification and gathering of appropriate evidence in which cost statement of the manufacturing goods are based on the ABC costing in which the direct materials will be used of £1,649. For this production of chairs, the total direct labor hours will be £3,825 due to which the prime cost will be equal to £11,724. The total overheads are £13,059 will be used for the manufacturing of the chairs. As a result, the total cost of finished goods will be £24,783.

The break even analysis of the production is £1,131,000. That means the company will get no loss no profit after reaching at this cost of the production. The financial analysis shows that required ...