ACCA F5 Life cycle costing Lecture 2 Example 1
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The method I did was by making the cost per unit as “x” and considering lifetime cost per unit to be as 7 because as the question stated about the ‘maximum manufacturing cost per unit’
So like that I got cost per unit to be as 4.8
But after seeing the way u did,
Mine seemed more time consuming then yours.
Thank you for such amazing videos sir ?
That was an emoji, not a question mark
Thank you for your comment 馃檪
Hi Sir on target costing. I missed where you got the $100 on the costs?
there is a mindless trick to it.
ex-
% of prof on cost % of prof on s/pr.
25% or 1/4 20% or 1/5
30% or 1/3 25% or 1/4
so what I have done here is.
Step1 convert the ? of prof to a fraction.
Step2 add / substract 1 to the denominator.( depending on what you want to convert to. ex- to convert to % prof on sales add 1 , to convert to % prof on cost substract 1)
Step3 Convert the fraction to %
Step4 thats it. now apply this to the cost/sale price.
Thanks
Dear Sir,
thank you for a great lecture, i feel very confident learning these topics with your help. Will the material become a lot more difficult in later chapters?
Thats impossible to answer – everyone finds different things difficult 馃檪
i understand . thank you once again for these great lectures
You are welcome
how come the cost is $100 please how did you arrive at the answer
But the cost is not $100 and so I don’t understand what you are asking.
I work through the question in the lecture, and of course there is a printed answer in the lecture notes.
Dear Sir,
regarding the example 1a, of life cycle costing,is calculate the target cost? the SAME/INTERCHANGEABLE with calculate the target cost per unit?.I am a little bit confused with your answer, it seems you calculated the target cost per unit ,NOT target cost.
I calculated the target cost as:
Selling price ($10.50 by 50000)units=$525000
Profit(525000 by 50/150)= $17500
Target cost= $35000
I would have calculated target cost per unit as:
TARGET COST PER UNIT: $350000/50000units= $7pu
Thanks for always been helpful.
NOTE: target cost $350000.
where does Sir take 50000 units ? Thanks
If you look at the question in the lecture notes, it says that there are 2,000 units in the first year and then 12,000 units in each of the next 4 years.
2,000 + (4 x 12,000) = 50,000 units in total.
lectures are short and very effective.. i can cover syllabus very fast…. I haven’t seen any local or international teacher’s lecture as good as these are,,, thank you sir…
Thank you very much for your comment 馃檪
A very good example incorporating target costing. Because of the cost gap of $0.80 (the difference between the target cost p.u.$7 and lifecycle cost p.u.$7.8) the product is not worth making.Thanks.
If the cost gap can be closed to meet the target cost then the product is worth making but not compromising customer perceived quality and satisfaction.
Correct 馃檪
Thanks John
You are welcome 馃檪
Thank you for the free lecture. It was really helpful.
You are welcome – I am pleased it was helpful 馃檪
Sir in part c of the example, you multiplied 50000 units by 7, why did you not multiply it by 10.5 as our aim was to achieve the required mark up?
Because if there is a mark-up of 50% on cost then the cost will have to be $7 since the selling price is $10.50.
Have you watched the lectures on the previous chapter (target costing)?
Pls why not 50/150 * $10.50. Why 100/150 *$10.50. I hve watched the previous lecture but im confused.
you will still get the same answer as 50/150*$10.50=$3.5 , which is the desired profit .Then following the formula of estimated selling price – desired profit ,
$10.50-$3.5= $7,
which is the target cost .. Hope it will be helpful .
Thank you very much. Much appreciated .