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Second question :
A contract requires 100 hours of skilled labour.
Labour is paid $5 per hour.
Labour is currently fully occupied making another which is generating a contribution of $8 per unit.
Each unit of the other product requires 2 hours of skilled labour.What is the relevant cost for labour? (Answer is 900 but how?)
Correct me if my understanding is right : the general apportionment of $20k is to be excluded from the $64k for keypads is because it is not relevant fixed cost?
Could you kindly explain the heat and power costs under note 3 for me also? Why is it considered as attributable fixed costs? What are the variable and fixed costs in that note and why do we take into account of fixed cost into this costing.
Sir, I’m not sure but you did mention in your lecture that whenever a question has a fixed cost (just like this question), it’s considered not relevant. But why is it the otherwise here?
Sir, why do we deduct the $1,235,000 with $900,000 instead of the $400,000 for the incremental cost for cost of sales?
Well, never mind. I think i’ve figured it out. its not about the cuts or treatments involved. its how many senior stylists there are for the bottleneck activity. the total salon hours per year is 2,400 and senior stylists’ time has been described as the bottleneck activity and there are 3 senior stylists. so 2,400 x 3 = 7,200 hours. correct?
Sir, past year (December 2013) question 2 : TPAR part b).
I do not know why in the given answer by the examiner its stated as 1,000 units for small panels and 1,500 units for large panels.
I did mine according to the ranks of the return per factory hour which is Large panels is 1 and small panel is 2.
So the units I put large panel as 1,800 units (maximum) multiplied it with its machine hours per unit and the remainder from the 2,700 bottleneck hours will be the hours for small panels resulting to 300 units.
Am I wrong using the method which you’ve used for your lecture notes?
To be honest, I don’t get the whole part B for this question. Even after trying to refer it to the exercises and examples that I did on the lecture notes on “Transfer Pricing” countless of times.
Let me try again as this is how I understand the question.
$5,340,000 is the contribution to C Co and then, it is added to the marginal cost (variable cost of $884k ($2,210,000 x 40%) from the remaining internal sales of $2,210,000 ($7.55mil – $5.34mil) making it $6.224mil for the minimum transfer price to Gearbox division??
Alright. Sir, one last thing on this question. what’s the difference between B and D?
So they are all consequences of divisionalisation. It’s just the matter of whether it’s usual or possible. Is that what you were trying to say, Sir?
I did watch the lectures. But I just wanna know which kind of cost would it differ to (either to B or C) if there’s an external market and a limited capacity.
As much as I want to say there are answers, they really aren’t because it’s just a handout. I am just unsure of what am I suppose to do first. Do I straight away draft down the cost per unit calculation for year 2008 starting : DM – $1,200, POH (setup, prod. orders & material handling) – $8,000 etc?
well i did watched it a few days back and tried to apply it to the question i have doubts in with reference to the examples you did in the lectures, i just seem to not get the picture yet.
I actually don’t get how to answer this type of question. For instance, where and what should i start my workings for and how do i know if i’m doing it correctly etc. Is there any pattern in these type of question? To be complete honest, this is one of the areas in FFM i’m very clueless about. 🙁
Yes. It’s something about NPV. If im not mistaken, it’s Able Ltd I think. I got wrong for the whole thing because I do not know how to work out the workings as there’s too many figures like incremental cost, additional revenue, scrap value, initial cost etc. You did mention 3,000. You said “The inflows are 120000 – 30000 = 90000 per year for 5 years”.