Please help for question Chapter 7 and 15,p5 ( according to opentuition notes)

P40: If demand is greater than what you order, you cannot meet demand and can sell only what you ordered. If demand is less than ordered, some units will be written off at cost.

For the other question, when you write down 1,800 for 4 years at 25% reducing balance, the tax WDV is 569. 1,000 - 569 = 430. At tax rate of 25% this is 107 balancing charge.

Demand: 400 500 700 900
300 2900 3400 4400 5400
500 3500 4000 5000 5000
700 4100 4600 4600 4600
800 4400 4400 4400 4400

But still how do i get the bold figure? I still couldnt get 2900, 3400 and etc...

Please advice.

Thanks

Top left figure, 2,900:

Capacity = 1,200. Ordinary demand = 400, contract size = 300, so both can be satisfied. 400 x (11 - 6) + 300 (9 - 6) = 2,900.

Bottom right figure, 4,400:

Capacity = 1,200. Ordinary demand = 900, contract size = 800. So, as the contract must be met, only 400 out of the 1,200 are left to satisfy demand. Therefore profit = 800 x (9 - 6) + 400 x (11 - 6) = 4,400.

I'm sure you will be able to fill in the other figures yourself.

Thank You.

Another question, please see page 127 from opentuition's note (Practice Answer)

How do i get the total time of 20hr, 32 hr,51.2 hr ,81.9 hr and 131.072 hr? from batches 1-16.

what is overhead cost and how to i get variable OH amount in pg 127?

Thank You.

Please see pg 128 (C) i only understand the expected value of variable cost. Beyond the calculation, i have no idea. Please explain further.

Thank You.

The cumulative average unit tile decreases to 80% every time cumulative production doubles:
20 x 0.8 = 16
16 x 0.8 = 12.8 etc.

Total time is the cumulative average unit time multiplied by the total units:

Total time for 2 batches = 2 x 16 = 32
Total time for 4 batches = 4 x 12.8 = 51.2 etc.

The overhead depends on the labour time. Skilled enjoy no learning effect so time = 5 x 4 x 16 batches. Semi skilled hours are less because of the learning so 131 hours at the overhead rate.

128 (c)

There seems to be a misprint. The contributions should be:

At 180: 15,750(180 - 81.5) = 1,551,375 etc

For transfer pricing chapters.

If there is
external market price with no spare capacity- transfer price at Market price
No external market price with spare capacity- transfer price at marginal cost
No external market price with no spare capacity- transfer price at marginal cost+ Opportunity cost.

right? May i know the external market price means there is a 3rd party company selling the same product OR the company itself is selling its product to outsider?

Thanks

You last point is wrong because if there is no external market there is no opportunity cost. The other two points are OK.