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dec 2010 paper ( contextual features)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › dec 2010 paper ( contextual features)

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by Ken Garrett.
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    Posts
  • August 29, 2016 at 6:29 am #335878
    Kate
    Member
    • Topics: 8
    • Replies: 9
    • ☆

    Dear, sir

    i got question in in the june 2011 question (Ecocar),
    There is the need of economic argument for and against outsourcing

    the question information
    Ecolite
    selling price : $7999
    variable cost: :4500
    weekly demand(cars): 6
    production time per car (hrs): 8

    production price by outsourcing is $ 3500
    Also, It says if outsourcing $1250 overhead costs per week are decreased.
    delivery cost :$250 each car outsourced
    and weelkly they produced the 6 cars

    In the answer
    if outsourcing, $1000 per car can be reduced compared with variable cost at $4500 and outsourcing production cost $3500.
    and including the delivery cost it would be $750 savings

    But i generated the answer as the costs are more than cost savings.
    cost savings by outsourcing (1000 +1250 ) – cost incurred 1500

    *$1000 savings from comparison between variable cost ($4500 )and production cost by outsourcing ( $3500 ) and $1250 as indirect cost saving

    $1500 cost incurred as delivery cost ( $250×6 cars generated per week)

    i am not sure that what area does calculate wrongly.
    and maybe is it that calculation of cost to the each car should be first and
    weekly cost savings ($1250 )and cost incurred ($1500) should be calculated separately ?

    Hope to hear soon
    Thanks for the help!

    Regards,
    Kate

    August 29, 2016 at 6:39 am #335882
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Have a look at the ACCA technical article on Outsourcing. It reworks the answer to Ecocars and should help.

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