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Q)) A company rents its factory for $90,000 per annum. This year 60,000 units have been manufactured in the factory utilising 75% of its total capacity. Next year the plan is to manufacture 100,000 units by using the existing factory at full capacity and by renting just sufficient additional capacity. The additional capacity is available at the same rental cost per square metre as the existing factory.
What is the budgeted total rental cost for next year?
i am sure this is basic but i am so confused, please help
You must have an answer in the same book in which you found the question. So in future ask about whatever it is in the answer that you are not clear about – then I will explain.
If 60,000 units are currently produced, then the cost per unit is $90,000/60,000.
So the cost for 100,000 units, is 100,000 multiplied by the cost per unit 🙂
Sir your answer is 150,000
But my answer is 112,500
I did by
60000 ÷ 75 then × 100 =80000unit
Then because i need 100000 units i divdied 100000÷80000 × 90000= 112500
I dont know the correct answer
Guide me if i am using a wrong method
Thank youMy mistake – sorry.
What you have written is correct.(But there is no point at all in attempting questions for which you do not have an answer. You should be using a Revision Kit from one of the ACCA approved publishers – they are full of exam standard questions together with answers and explanations.)
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