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- This topic has 7 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- February 23, 2021 at 10:48 am #611426
under production mix, if fixed cost changes per poduct unit say for example for produt A fc is 2 for B 3 for C 4 in this case do we always ignore fixed cost in finding total profit?or do we always assume fixed cost remaines stable?
February 23, 2021 at 4:19 pm #611453It really depends on the context of the question.
We generally assume that the total fixed costs remain the same regardless of how it is shared between products, except in the case of situations where there is fixed costs that are specific to a particular product (which is most likely to be in the case short-term decision making as I explain in my lectures on this).
February 23, 2021 at 5:34 pm #611463there is a long question in Becker Albion co in the answer has been written fixed cost is ignored as it is assumsed not to vary with changes in the level of production unit.When i read the whole scenario there has not been written anything relating fixed cost. I know you do not have becker.
February 24, 2021 at 6:56 am #611495Albion is an old exam question from 18 years ago.
There is no mention of any product specific fixed costs and therefore total fixed costs will be unchanged regardless of the level of production and which products are produced. This is the definition of a fixed cost – that the total is fixed regardless of the level of production.
(I am surprised that you are using a Becker book – they closed down in the UK several years ago and are therefore no longer an ACCA Approved Publisher.)
February 25, 2021 at 8:56 am #611629I usually solve questions from Bpp 2020 2021, examiner report multiple choice questions, past paper multiple choice questions, Kaplan multiple choice questions.and Study text’s also has multiple choice questions in the back and I solve some multiple choice question from Bpp workbook. Also long questions. Trying to do my best.
Dear Tutor, I am using just multiple choice questions and when I was cheking the answers of multiple choice questions caught albion co’s question’s answer caught my attention so then i just for interest read the question why it has been written in this way . If I face the question similar to Albion co in a real exam, do i have to multiply each product’s fixed cost per unit each product’s total production unit and add them all and deduct total contribution to get profit ?I rarely see fixed cost per unit for each product given separately usually given in total say for example $2mln or $5mln.
February 25, 2021 at 9:33 am #611647The total fixed cost is the total of all of the fixed costs (multiplying the units by the cost per unit for each product and adding them up).
Profit is always the contribution less the fixed costs.
February 25, 2021 at 9:43 am #611651So the last one is clear.Thnak you very much
February 25, 2021 at 2:44 pm #611682You are welcome 🙂
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