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Hello,
Where can I find the explanatory answers of the questions in Section B, regarding Able Ltd. and Beech Ltd.
Thank you
They do not appear. If you say which of the questions you are not clear about then I will give you an answer here.
(I assume that you watched my free lectures on variance analysis before attempting the mock exam? 🙂 )
Yes, of course I’ve seen all of the lectures.
Able Ltd is considering a new project: a) NPV b) Rate of Return c) Payback Period
Initial cost: 300K
Expected life: 5 years
Scrap value: 20K
Addition revenue per yer: 120K
Incremental cost 30K per year
Cost of capital: 10%You can find the answers here:
sir can you please help me solve the answer for section B standard costing question, ‘beech ltd…’
(a) They actually bought 24,000m of wood and actually paid $108,000.
The should have paid 24,000 x $5 = $120,000.
Therefore there is a materials price variance of $12,000 favourable.They actually produced 15,000 desks and actually used 24,000m.
The should have used 15,000 x 1.5 = 22,500m.
Therefore the materials usage variance = 1,500m x $5 = $7,500 adverse(b) it is only the sales volume variance that will change – with absorption costing it is calculated using standard profit, with marginal costing it is calculated using standard contribution.
(c) an adverse labour efficiency variance could be caused by implying lower-skilled workers (because they work more slowly) or by using lower grade material (because it takes longer to work on).
Have you watched my free lectures on variances? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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