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I passed on first attempt with 60% – cannot thank you enough John!
Self study using OT lectures and notes, Kaplan text and practice kit, and BPP practice kit.I think I know where I went wrong – didn’t read the Kappa question carefully and mixed up the input kgs and the 100kg of Omega. From the way I understand now, there is no material waste. Standard input in total is 120 kgs per unit and ‘100 kg of Omega’ is to be treated as 1 unit like it would be in any other standard question.
Is that correct?Hi John, with regards to point 2 in your response, why do you compare actual results with last year instead of budget this year?
Additional information given in the question:
Cardio Co has recently received a request from a customer, Heart Co, to provide a one-off order of fitness machines (T,C and R) in excess of normal budgeted production for 2016. The order would need to be completed within two weeks.No problem, hope you are keeping safe. Respond when you can, here is the question. As I am unable to insert tables here, I have uploaded the table as a picture to a file hosting website (wetransfer) – link included below.
Cardio Co manufactures four types of fitness equipment: elliptical trainers (E), treadmills (T), cross trainers (C) and rowing machines (R). Cardio Co is considering ceasing to produce elliptical trainers at the end of 2015. The budgeted sales prices and volumes for the next year (2016) can be found in the link below.
Labour costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labour costs are expected to be $55,000 for the next year.
Question 3: What is the margin of safety in $ revenue for Cardio Co in 2015?
Answer: $ 1,577,053Question 5: Which statement correctly describes the treatment of general fixed overheads when preparing the Heart Co quotation?
A The overheads should be excluded because they are a sunk cost.
B The overheads should be excluded because they are not incremental costs.
C The overheads should be included because they relate to production costs.
D The overheads should be included because all expenses should be recovered.Answer for question 5 is down as B. I would have thought overheads would be included because we included these for question 3 to calculate breakeven sales revenue which goes into margin of safety calculation.
John, in the following sub-question 5:
Which statement correctly describes the treatment of general fixed overheads when preparing the Heart Co quotation?
Answer is: The overheads should be excluded because they are not incremental costs.I don’t understand why these costs are excluded when for the calculation of margin of safety (sub-question 3) these were included.
