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A company makes 10,000 units of a component for a variable cost of $25,000. This takes all of the 6,000 production hours available.
The components (essential for other production) could be bought for $55,000 and the machine hours released could then be spent on making:
Product
P
QUnit contribution
18
48Maximum demand (units)
500
250Machine hours per unit
6
12Contribution will be maximised if the company:
A Buys 10,000 units and makes P
B Buys 10,000 units and makes Q
C Buys 10,000 units and makes P and Q
D Manufactures 10,000 unitsAnswer is D. C gives the most contribution of 3 and 4 which gives total of 7. D only gives of 5.
Question 2 from Notes
Mr A Chancer is thinking of investing $20,000 on 31 December 2013 to receive on repayment of $25,000 on 1 January 2016.
What is the IRR on his investment?
(a) 12.5%
(b) 8%
(c) 5.7%
(d) 25%
I understood every thing but I can not find who are there 3 years from 31 December 2013 and 1 Jan 2016. Wouldn’t it be 2 years?If no units are bought in, then rhe saving is
55,000 – 25,000 = 30,000
compared to buying in.
Work out total contribution for each option offered.
Q2
You are correct. The time elapsed between in investing and return is 24 months: ie 2 years.
Question:
The trend of sales is an increase of $1,000 per quarter. The trend figure for year 4 season 2 was $12,000.
What is the predicted sales figure for year 5 season 4 if the seasonal adjustment is 75% for season 2 and 110% for season 4.
$17,273
$20,900
$16,364
$19,800What is seasonal adjustment? And why seasonal adjustment is done in season 4, not is season 2. I neither found in books nor in notes, does it means Seasonal Variation?
A seasonal adjustment (or seasonal variation) is made to convert a trend figure to a predicted figure for a given season. Eg if the season is a ‘high’ season (lots of sales), the seasonal adjustment will mean higher sales should be predicted.
First see where the trend takes you, then apply the seasonal adjustment.
Trend for y4s2 is 12,000 (that is before seasonal adjustment so can be used as the initial projection). Y5s4 is 6 seasons further on, so add 6 x 1000 = 18,000.
Season 4 is a high season so this needs to be adjusted by x 110% and becomes 19800.
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