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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › dec 2010 paper ( contextual features)
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
Have a look at the ACCA technical article on Outsourcing. It reworks the answer to Ecocars and should help.
