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Costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Costing

  • This topic has 2 replies, 2 voices, and was last updated 6 years ago by AvatarJohn Moffat.
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  • April 17, 2020 at 5:03 am #568490
    Avatarrayhwlam
    Member
    • Topics: 6
    • Replies: 5
    • ☆

    A transport company operates a regular delivery service from its warehouse at point A to a destination at point B, the total annual kilometres covered (including 100 outward and return journeys) being 18,000 km’s per 10-ton vehicle

    For the outward journey the vehicle is always fully loaded and in addition there is a regular demand for return loads of 400 tons per vehicle per annum. The standard charge to customers is 24 cents per ton/km. The costs of operating this service per vehicle are as follows:-

    Vehicle fixed charges $5,400 per annum
    Drivers’ wages, including normal overtime $10,260 per annum
    Vehicle running costs 33 cents per km

    The company is willing to pay a bonus to drivers of up to 30% of any additional profit for obtaining additional return loads.

    (a) What annual profit would be earned per vehicle without any additional return loads?

    Answer:

    Annual cost per vehicle
    Fixed charges $5,400
    Drivers’ wages $10,260
    Running cost 18,000 x 33 cents $5,940
    Total Cost ($21,600)

    Ton/km’s
    Income
    100 outward journeys = 9,000km’s x 10tons 90,000
    Return journeys = 400 tons x 90 km’s 36,000
    Total 126,000 x 24 cents $30,240

    Annual profit per vehicle 8,640

    Below my questions:
    I am completely confused by the unit.
    1)why the income is calculated by 100 outward journeys = 9,000km’s x 10tons
    why the answer uses 9000km to times 10tons?
    2)why return journey calculates per journey i.e (9000/100)
    it’s not per ton per km

    Thank you very much.

    April 17, 2020 at 5:10 am #568491
    Avatarrayhwlam
    Member
    • Topics: 6
    • Replies: 5
    • ☆

    Answer:

    Annual cost per vehicle
    Fixed charges?????????????????????$5,400
    Drivers’ wages?????????????????????$10,260
    Running cost 18,000 x 33 cents?????????????$5,940
    Total Cost??????????????????????($21,600)

    ??????????????????????Ton/km’s
    Income
    100 outward journeys = 9,000km’s x 10tons???90,000
    Return journeys = 400 tons x 90 km’s ??????36,000
    Total 126,000 x 24 cents????????????????$30,240

    Annual profit per vehicle ????????????????8,640

    April 17, 2020 at 9:51 am #568509
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54836
    • ☆☆☆☆☆

    9,000 kms is used because the return journey is 18,000 km so it must be 9,000 each way.
    The outward and the return journey need looking at separately because it is always fully loaded on the outward journey, but not for the return journey.

    For the outward journey there is 10 tons on each journey. However for the return journey there are 400 tons per year (not for each trip).

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