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P5 JUNE 13

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › P5 JUNE 13

  • This topic has 5 replies, 2 voices, and was last updated 7 years ago by Ken Garrett.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 29, 2015 at 10:18 pm #279629
    310zcx
    Member
    • Topics: 52
    • Replies: 66
    • ☆☆

    Dear sir,
    for the JUNE 13 PAPER, the Q4. in the examiner answer with page 20. it says that the mark-up on actual total production cost of 30%….. however, the scenario does not provide any information about this 30% figure? where does this amount comes from?
    thanks so much

    October 30, 2015 at 8:25 am #279659
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    He says:

    “… A mark-up on actual total production costs of 30% (say) would not seem unusual…”

    In other word he has chosen 30% as an example of a reasonable mark-up. 30% is not in the question. 50% would be fine too.

    October 30, 2015 at 8:34 am #279665
    310zcx
    Member
    • Topics: 52
    • Replies: 66
    • ☆☆

    DEAR SIR,
    I have another question, that is the ‘cost plus basis’ is same as the ‘actual total cost’? tight?
    thanks so much!

    October 30, 2015 at 9:53 am #279668
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    Actual cost = actual cost, without a mark-up

    Cost plus = cost, plus a mark-up for profit.

    October 30, 2015 at 10:00 am #279669
    310zcx
    Member
    • Topics: 52
    • Replies: 66
    • ☆☆

    Thanks. Sir
    I know if use the cost plus basis then the price =cost*mark-up

    If use the total actual cost, the price calculation is same with the method of cost plus basis?
    Thanks. Sir

    October 30, 2015 at 11:51 am #279674
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    It might be. It depends what you base the cost+ on.

    In this question they make the point that haveing a trandfer price = Actual Cost plus a mark-up gives no incentive to keep costs down because the bigger the cost, the bigger the mark-up and the boigger the profit.

    So, here they suggest that the transfer price should be budgeted cost plus so that any cost over-runs hurt the producing division not the buying division.

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