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September 23, 2022 at 6:16 am
Could you please help me with explaining this answer from BPP PM workbook further question solutions regarding SECTION C question 66 AB.
b) Non- financial factors that must be considered in reaching the decision
If the recommended course of action is undertaken, the workforce will produce enough units of X in the next 13 weeks to satisfy sales
demand over the next year (with 18 weeks supply of existing finished goods inventories and a further 35 weeks supply obtainable from
direct material inventories).
I cannot understand how the 13 weeks come about, as the company should produce X for extra 33 weeks to use their inventory of the raw materials before switching to produce Y. Could you please help me with this. If you could trace the question, please.
John Moffat says
September 23, 2022 at 7:06 am
You must ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.
August 30, 2022 at 1:49 pm
Sir, In question number 2, It said the materials needs to be replaced, so we skip the opportunity cost & take the current market price? If the material is in regular use, CURRENT PRICE should be chooses over opportunities cost?
August 30, 2022 at 5:34 pm
Yes, and I do explain this in my free lectures.
August 31, 2022 at 6:27 am
Your lectures are amazing sir, I am going through it. Thank you so much for helping all the students all around the world who cannot afford professional teaching !!
August 31, 2022 at 3:34 pm
Thank you for your comment 🙂
July 15, 2022 at 5:30 am
in q 5
the answer is 100 000
but in the question is giving the contribution which is calculated after subtracting the 8 $ per hour
cm = p – vc ( labour and material )
why to calculate it again ?
July 15, 2022 at 8:40 am
We certainly will be paying the $8 anyway.
However, let me make up some figures so as to explain ?
Suppose the revenue per unit is $30, the materials are $10, and the labour is $8. So the contribution is $12.
If the labour is used on another contract, then we lose the revenue of $30, we save the materials of $10. We still pay the labour of $8 and so the net loss is 30 – 10 = $20. This is always going to be the same as the contribution (12) plus the labour (8).
July 22, 2022 at 7:15 am
Can you please explain it using some other example as well? i am still not clear on this. I still think that the labour cost is something we will pay anyway whether we take the new contract or not. By taking the new contract, only the change would be lost contribution of 60,000. How i prepare my mind that 60,000 is not the correct answer… I am not able to understand
July 22, 2022 at 3:58 pm
I mistyped one figure in my previous reply, but I have now corrected it. So please read it again 🙂
August 8, 2022 at 4:44 pm
Can I relate this to the concept that labour cost is fixed in the short run.?
August 8, 2022 at 7:14 pm
No. We only assume labour to be fixed in the short-term when using throughput accounting. In relevant costing questions then the way of dealing with labour depends on the wording of the question.
May 10, 2022 at 2:17 pm
In question 5,
My answer was $60000
$12x5000hrs – contribution lost – relevant
$8 per hr – labour cost – committed – not relevant
Correct answer was $100000
Labour paid $8 per hr – why are those costs not treated as committed costs as they are going to occur any way?
May 10, 2022 at 2:26 pm
I got it now – found the answer from the previous comments. Thank you
May 10, 2022 at 3:03 pm
I am pleased you have now got it 🙂
May 9, 2022 at 8:13 pm
Thanks for the lectures and practice questions.
For Q2, I can’t understand why we don’t include the opportunity cost of selling the material in inventory ($1500 x 9) ?
Presumably, we would sell the material if the contract didn’t go ahead? Shouldn’t this be a relevant cost therefore?
Thanks in advance.
May 12, 2022 at 9:46 pm
Is it because the material is used frequently?
May 13, 2022 at 8:03 am
Yes it is 🙂 It is in regular use and will need replacing.
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