BPP Q5 (exams in 2011 study text page 406) Bottlenecks

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This topic contains 5 replies, has 3 voices, and was last updated by Profile photo of John Moffat John Moffat 2 years, 3 months ago. This post has been viewed 58 times

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  • Profile photo of Gee
    Gee
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    • Topics: 3
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    Hi John
    Do you have access to the above text book?
    If so, please can you advise on the answer to the maximum profit calculation in question 5.b(i)?
    I understand the profit maximising mix is A 144,000 units and B 13,000 units. These figures (number of units) are then used to calculate the throughput return (I understand). Why then does the calucation not use these units to calculate the variable cost. It uses the original estimate of sales / production A 120,000 units and B 45,000????
    I think my brain is tired now!
    Hope you can help.


    Profile photo of Gee
    Gee
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    John please note, the above should say “Why does the calculation not use these units to calculate the variable OVERHEAD cost”


    Profile photo of acca13
    acca13
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    • Topics: 48
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    That’s because if you re-read the (b) part of the requirement, it asks you to calculate the OH’s (that were variable in (a) part) based on estimated production/sales mix.


    Profile photo of John Moffat
    John Moffat
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    acca13 is correct. With throughput we are assuming that variable costs are fixed in the short-term (apart from materials) and therefore the total from part (a) stay the total.


    Profile photo of Gee
    Gee
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    thanks to you both.


    Profile photo of John Moffat
    John Moffat
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    You are welcome.

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