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No – sorry!
I do not have the Kaplan exam kit.Two things:
Firstly, if it is a past exam question then I can find it – just give me the name and the exam date. If it is not a past exam question but is a short question, then by all means type it out here for me.
Secondly, have you watched my free lectures? (Because they are a complete course for Paper F5 and should cover whatever this question is asking about!)
The predicted selling price for a product has been set at $56 per unit. The desired mark-up on cost is 25% and the material cost for the product is estimated to be $16 before allowing for additional materials to allow for shrinkage of 20% (for every 10 kg of material going in, only 8 kg comes out). Labour is the only other cost and 2 hours are needed.
What is the most the business can pay per labour hour, if a cost gap is to be avoided?A $12.40
B $14.40
C $24.80
D Cannot be determined without any more informationThe target cost is 56 x 100/125 = $44.80.
For materials, every 10 kg bought only gives 8 kg for the product. So in order to have 8 kg, then need to actually buy 10 kg. At the moment they have not allowed for the shrinkage and so are using a price per kg of 16/8 = $2. But since they need to buy 10kg for each unit, they should be using 10 x $2 = $20 per unit (because that it what they will have to pay in order to end up with 8kg.
So the most they can pay for labour = 44.80 – 20.00 = 24.80.
Since this is for 2 hours of labour it means that the most per hour is 24.80/2 = $12.40.
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