- This topic has 9 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Sir, could you please explain how to arrive at this answer for the questions.
1. The budgeted overheads of Cole Ltd for the next year have been analysed as follows:
Machine running costs $640,000
Purchase order processing cost $450,000
Production run set-up costs $180,000
In the next year it is anticipated that machine will run for 32000 hours, 6000 purchase orders will be 450 production runs.
One of the company’s products is produced in batches of 500.Each batch require a separate production run,30 purchase orders and 750 machine hour.
Using ABC, what is the overhead cost per unit of the product?Answer is – $35.3
2.) A company makes a single product which it sells for $16 per unit.Fixed costs are $76800 per month and the product has a profit/volume ratio of 40%. In a period when actual sales were $224000, the company’s safety margin,in units, was:
Answer is – 2000 unit
1. Machine running costs per hour = 640,000 / 32,000 = $20 per hour
PO processing cost per order = 450,000 / 6,000 = $75 per order
Set-up costs per run = 180,000 / 450 = $400 per runTherefore for one batch of the product, the total overhead = (750 hours x $20) + (30 orders x $75) + (1 x $400) = $17,650
There are 500 units in a batch, so the cost per unit = 17,650 / 500 = $35.30
2. Actual sales units = 224,000 / 16 = 14,000 units
Breakeven revenue = 76,800 / 0.4 = $192,000
Breakeven units = 192,000 / 16 = 12,000 unitsTherefore margin of safety = 14,000 – 12,000 = 2,000 units.
(Our free lectures will help you with both of these questions – they are a complete course for Paper F5 and cover everything you need to be able to pass the exam well.)
Great. Do ask here if there is anything in them that you are not clear about 🙂
Hello Sir, Can I have working for these questions please.
1.) An office manager of Harris Plc wishes to minimise the cost of telephone calls make.40% of calls in peak hours cost $1 each and the reminder of such calls cost $1.5 each. 30% of calls at other times cost $0.8 each, 50% of hem cost 0.9 each, and 20% of them cost $1 each.These proportion cannot be varied, though the total number of calls make in peak hours and of calls made at other times can be. If X= the numbers of calls made each day in peak hour, and Y= number of calls made each day at other times,the official manager’s objective is to:
Answer is – Minimise 130X+89Y
2.)
Beauty Co makes two products,nail polish and lipsticks. Nail polish sales make up 30% of total sales and their variable costs are 45% as a percentage of sales vale. Lipsticks sales are 70% of the total sales and their variable cost are 40% as a percentage of sales value.
Total fixed cost are $400,000 for the company.
Calculate the break even revenue for Beauty Co.Answer is – $683,761
Surely the workings are given in the same book in which you found the questions?
1. The average cost of calls in peak hours is (40% x $1) + (60% x $1.50) = 130 cents
The average cost of calls at other times is (30% x $0.80) + (50% x $0.90) + (20% x $1) = 89cSo the total cost is 130X + 89Y
2. The CS ratio for nail polish is 100 – 45 = 55%
The CS ratio for lipstick is 100 – 40 = 60%Therefore the average CS ratio = (30% x 55%) + (70% x 60%) = 58.5%
Therefore breakeven revenue = 400,000 / 58.5% = $683,761
Only answers are given.Workings are not provide.
Thank you very much Sir.Your working is very simple and easy to understand.
- You must be logged in to reply to this topic.