[Vanda]

Hi,

I think you should find out what is the nature of that other income. If you can find a reasoning why it should (on not) belong to a certain group, you should include(or exclude) it to that group.

But I would explain why I did in that way and what are the drawback of that approach.

[Vanda]

It would be ok, but there is no more extra demand for product C.

That is why you have to calculate the shadow price with 280 A an 220. B

[Vanda]

First we need to rank the products
0.
Product: A ***. B. ***. C
Contrib: $4.5 * $4.8 * $2.95
Mat/unit 2.5 * 3. *** 1.5
Cont/mat 1.8 * 1.2 * 1.97
Ranking. 2. * 3. ***. 1.

It looks like that the production plan is maximising the contribution.

1.
How many extra products we could produce and sell, if we buy the extra 1000kg raw material:

Product A demand less production plan:

1000 – 720 = 280

280 * 2.5kg = 440kg

660kg / 3 = 220 product B

2.
Calculate extra contribution.

280 * $ 4.5 = $ 1260
220 * $ 4.8 = $ 1056

Total: $ 3316

3. A
Max amount what the company could pay, if the fix costs are already absorbed:

Although the lower is the better

Material cost covered by the variable costs:
1000kg*0.5 = 500
Plus
Material cost covered by contribution:
3316

500 + 3316 = 3816
3. B
Max amount what the company could pay, if the fix costs haven’t absorbed yet:

Although the lower is the better

Material cost covered by the variable costs:
1000kg*0.5 = 500
Plus
Material cost covered by contribution:
3316

500 + 3316 = 3816

Less outstanding part of fixed cost.

***
I am a student, my answer might be completely wrong…

[Vanda]

I do not have a lot of experience with BPP, but I can recommend the Kaplan books.

I used Kaplan for F6(passed) and I am using it for F5.

I have used BPP for F4(passed) but it was a bit too wordy, too theoretical and dry for me, maybe because of the nature of the paper, I do not know.

I prefer Kaplan to BPP, because i think it contains more explanations and Exercises than a BPP book.

If I had unlimited money, time and enthusiasm, I would use both, though. 🙂

[Vanda]

When Harry bought the copyright, he brought 20 years of useful life of the asset before the copyright expires. When he sold the copyright, he already used up 4 Years, therefore he sold the copyright with 20-4=16 years of useful life. That is the figure what you have to use for the pro rata calculation.

Sales proceeds of the copyright(useful for 16 years) 22,000
Less: Cost ( 16/20 * 20,000 ) 16,000
—————
Capital Gain 6,000

[Vanda]

It means the following:

If I send a letter to B, that I am willing to sell him my book for £3 and he also sends me a letter at the same time, that he is willing to pay £3 for my book, there is no contract. There are two separate offer, though.

It is not legally binding and not enforceable until one of us send another letter, or choose another way of communication, and accept the other’s offer.

[Author]

Posts