Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Pixie Pharmaceuticals Q126-130 BPP
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- April 18, 2018 at 7:33 pm #448047
Pixie Pharmaceuticals is a research-based company which manufactures a variety of drugs. The purchasing manager has recently been approached by three new manufacturers to produce 3 different drugs, the following cost and price info. is provided:
Drugs:Fairyoxide:
# of units: 20,000
Direct material cost per unit: $0.8
Direct labor cost per unit: $1.6
Direct expense cost per unit: $0.4
Fixed cost per unit: $0.8
Selling price per unit : $4.00
Imported price per unit : $2.75Spriteolite:
# of units: 40,000
Direct material cost per unit: $1.00
Direct labor cost per unit: $1.80
Direct expense cost per unit: $0.6
Fixed cost per unit: $1.0
Selling price per unit : $5.00
Imported price per unit : $4.20Goblinex:
# of units: 80,000
Direct material cost per unit: $0.4
Direct labor cost per unit: $0.8
Direct expense cost per unit: $0.2
Fixed cost per unit: $0.4
Selling price per unit : $2.00
Imported price per unit : $2.00Q127 What saving/(increased cost) per unit would be made/(incurred) if Fairyoxide was purchased from the overseas producer?
A $0.85
B $0.05
C $0.45
D ($0.05)My work/answer
(0.8+1.6+0.4+0.8) – 2.75 = $0.85
AThe right answer B
(0.8+1.6+0.4) – 2.75 = $0.05Why weren’t the fixed costs included in the calculation (there is no mention of contribution cost)?
Also just wondering in the future if I have a question from the revision kit do you have a copy of the BPP revision kit so instead of typing the whole question I just mention the question#?Thank you!!
April 19, 2018 at 7:01 am #448093I do have the Revision Kit, so please do not type our full questions (it is breach of copyright as well to type out BPP questions 🙂 )
Unless told otherwise, the total fixed overheads of the business will remain the same whether or not they produce Fairyoxide themselves. How they choose to absorb the overheads between the various products is irrelevant – the total will stay the same regardless.
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