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Hello Sir.
Could you please help me out in the following questions? I’d be so so grateful.
Q1.
The following information is available for X plc:
Budgeted production 13120 units
Budgeted fixed O.H $45920
Budgeted labour hours 26240
Actual production 12920 units
Actual fixed O.H $48400
Actual labour hours 25200
What is the fixed OH capacity variance?
What is the fixed OH efficiency variance?I got 1820(F) for capacity variance but the answer states it is adverse? Can you please tell me how and why? Also please tell me how to calculate the fixed OH efficiency variance?
Q2.
A division of a company is capable of making 2 products, X and Y.
X Y
External selling price 80 100
Variable cost 60 70
Contribution 20 30
Labour hours per unit 5 10
The company has limited labour hours available , and another division requires product Y.
What is the minimum transfer price that should be charged by the division in order to achieve goal congruence?Q3.
A contract required 100 hours of skilled labour
Labour is paid $5 per hour.
Labour is currently fully occupied making another product which is generating a contribution of $8 per unit.
Each unit of other product requires 2 hours of skilled labour.
What is the relevant cost of labour?Q4.
A company has budgeted to sell 100000 units of its product at a price of $25 per unit. The CS ratio is 25% and the fixed costs are $375000.
What is the breakeven sales revenue and the margin of safety?Please let me know how to solve these. Looking forward.
Thank you!
oh i got it.
$8 is contribution per unit. so we will be losing contribution of $4 per hour.
so $5 per hour we need to pay to labour and $4 is lost contribution per hour.
so new project needs 100 hrs and it becomes 100x 5+4= 900 labour cost
Q4. I have calculated the Breakeven sales revenue but i can’t calculate the MOS as a %. They need MOS as a % and I’ve no idea how to do that.
The answer is breakeven revenue $1500000 and MOS 40%.and thank youu so much for the labour questionn.
Q3
relevant cost is labor rate plus lost contribution.loss contribution is 8/2=4 as if we accept this contract we will lost in another contract as the labor is fully utilized.
so the relevant cost will be 4+5= $9/h it gives you $900Q4
breakeven is fixed cost/CS ratiobreakeven = 375000/0.25= $ 1500 000
margin of safety is sales – breakeven
2500 000 – 1500 000= 1000 000
margin of safety ration is margin of safety/sales
1000/2500= 40%question 1
capacity variance shouldn’t be favorable as the use less hour than budgeted. with more hour they should have product more but less hour means less production. capacity is the inverse of other.the efficiency variance
standard hour 26240/13120 =2 hours unit
2 X actual production
2 * 12920=25 840 hoursvariance is (25840 – 25200) 1.75 you have the answer, it should be favorable as we use less hour than budgeted.
you are very welcome. the tutor won’t be very happy as we’re not allowed to answer here. so im gone
Sehrish you have to calculate the OAR/ hour which is B.OH/B.Activity
45920/26240 = $1.75/hr x (26240-25200)
=1820 (A).
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