• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Relevant costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Relevant costing

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 6, 2019 at 3:01 am #511330
    mhfrdzi
    Participant
    • Topics: 21
    • Replies: 9
    • ☆

    A company which manufactures and sells one single product iscurrently operating at 85% of full capacity, producing 102,000 units permonth. The current total monthly costs of production amount to £330,000, of which £75,000 are fixed and are expected to remainunchanged for all levels of activity up to full capacity.
    A new potential customer has expressed interest in taking regularmonthly delivery of 12,000 units at a price of £2.80 per unit.
    All existing production is sold each month at a price of £3.25 perunit. If the new business is accepted, existing sales are expected tofall by 2 units for every 15 units sold to the new customer.
    What is the overall increase in monthly profit which would result from accepting the new business?

    First of all, I already watch your free lectures. However, I still found myself getting confused when I work on questions regarding opportunity cost. In this question, I know that FC should be ignored and the VC is 2.50 per unit. If we accept the new business, we will generate 12,000 x 0.30 = 3,600. I don’t have problem with this one. If we don’t accept the new business, according to the answer, 1600 x $0.75 = $1200. I’m confused shouldn’t it be (12,000 units-1,600 units)x$0.75?

    April 6, 2019 at 10:03 am #511345
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    Accepting the new business means that existing sales will fall by 2 units for every 15 units of new sales. So the fall in sales will be 2/15 x 12,000 = 1,600. If they don’t accept the new business then instead they will sell 1,600 on the normal basis.

    April 6, 2019 at 2:47 pm #511355
    mhfrdzi
    Participant
    • Topics: 21
    • Replies: 9
    • ☆

    Thank you! 🙂

    April 7, 2019 at 9:17 am #511373
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • hhys on PM Chapter 4 Questions Environmental Management Accounting
  • singhjyoti on Conceptual Framework – ACCA SBR lecture
  • John Moffat on Time Series Analysis – ACCA Management Accounting (MA)
  • azubair on Time Series Analysis – ACCA Management Accounting (MA)
  • Gowri7 on Relevant cash flows for DCF Working capital (examples 2 and 3) – ACCA Financial Management (FM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in