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Question no 13 September 2016 F5 paper
The understanding of above question is beyond me.
I can only understand if workings are shown.
I cannot figure what figure was flexed in the question and compared with what.You have to look at each item separately and decide whether the manager has done well or badly. Changes in the market are outside her control.
Material costs: last year each unit cost 8,000/400 = $20 and they had budgeted on $20 per unit (10,000/500).
Suppliers lower their prices by 5% and so we would expect to spend $19 per unit.
She actually spent 6,500/300 = $21.67 per unit – so poor performance.Selling price last year (and budgeted selling price) was $100 per unit. Prices in the market fell by 10%, so she can only really expect to sell for $90. She actually sold for 28,500/300 = $95 per unit – good performance.
The sales volume last year was 400. The market has fallen by 25%, so we can reasonably only expect to see 25% less than 400, which is 300. She has sold 300 and so performance is OK.
@johnmoffat said:
You have to look at each item separately and decide whether the manager has done well or badly. Changes in the market are outside her control.Material costs: last year each unit cost 8,000/400 = $20 and they had budgeted on $20 per unit (10,000/500).
Suppliers lower their prices by 5% and so we would expect to spend $19 per unit.
She actually spent 6,500/300 = $21.67 per unit – so poor performance.Selling price last year (and budgeted selling price) was $100 per unit. Prices in the market fell by 10%, so she can only really expect to sell for $90. She actually sold for 28,500/300 = $95 per unit – good performance.
The sales volume last year was 400. The market has fallen by 25%, so we can reasonably only expect to see 25% less than 400, which is 300. She has sold 300 and so performance is OK.
Thanks Sir! All Clear
It was such a simple question but the way information was given confused me.
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