PEV November 2004 - Section 2 - Task 2.2

System

Please can anyone throw some light on this please ~ In Section 2 task 2.2 we are asked to revise a profit & loss account for Factory B, assuming Factory A is closed.

I did this by applying 40% of Factory A sales i.e. 8,800 to Factory B sales of 30,000 units; giving 38,800 in total and proceeded to apply this volume to the costs of Factory B; e.g. for material £784,000/30,000 x 38,800 (less 5%)= £963,275. The answer just takes 40% of Factory A costs and adds them to Factory B. Can any of you good people out there tell me why they did it that way. Thanks

System

Re:PEV November 2004 - Section 2 - Task 2.2

Hi Linda

Ihave had a look at the paper, and the easiest option is to look at the original P & L and apply all the additional data to the cost figures. Messing around with the units produced makes it far too complicated and too time consuming - which is inshort supply in an exam.

Hope it goes well
Eva

System

Re:PEV November 2004 - Section 2 - Task 2.2

Thanks for that, but what really concerned me was doing it the way I did gave me different answers because, for instance, the unit cost of material was different between the two factories; and if I did it my way in the exam I would have arrived at a compeltely different answer. I suppose I just wanted to know why they calculated the addtional production/sales using factory A rates; if factory A was closed, wouldn't all costs be calculated using Factory Bs rates?

System

Re:PEV November 2004 - Section 2 - Task 2.2

I suppose this is one of my worst subjects ever and I just take the easy option.

Wishing you well on Monday.
Eva

System

Re:PEV November 2004 - Section 2 - Task 2.2

I think I will have to keep my fingers crossed that a similar situation doesn't crop up on Monday. Good luck to you too.