# Unit 9 December 2005 Pcr

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Hi

I am really hoping someone can explain something to me, on the Exam paper for December 2005 Task 1.4 a, b, c, i have looked at the answer and i am really stuck i have not saw a question like this before.

It asked you to work out the variable cost of production for each product.

Really hope someone can help. Thankyou Zoe

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• Registered, Moderator Posts: 2,034 mod
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PCR Dec 2005

Here is the task
DATA
Louise Owen has to discuss the budgeted results of Solden with her other directors and asks
for your help in preparing the information. She gives you the following information.
• Solden uses marginal (or variable) costing when preparing reports for directors.
• Any idle time or overtime is charged to fixed overheads.
• The budgeted selling price of each Exe is £200.
• The budgeted selling price of each Wye is £250.
• The opening stocks of 140 Exes, 184 Wyes and 2,000 kilograms of materials have the
same unit costs as in period 1.
Task 1.4
Prepare the following statements for period 1:
(a) the budgeted marginal (or variable) cost of production for each product
(b) the unit cost of fault-free production for each product
(c) a budgeted operating statement showing

We know that only material and labour are variable (from earlier in the section)
(a) .......................................................EXE................................. WYE
...............................kg or hrs/unit........ rate...... £........ kg or hrs/unit...... rate........ £
Materials....................... 6.................... 20........ 120......... 8................... 20........ 160........
Labour.......................... 8...................... 6......... 48......... 5..................... 6.......... 30
Variable cost per unit......................................... 168............................................ 190
Total production (units).................................... 3,500 ........................................ 2,800
Total marginal cost ..................................... £588,000 ................................... £532,000
Sandy
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(b) Unit cost of fault-free production for each product
% of total production faulty ........... 4.00%........... 5.00%
Unit Cost (fault free)................. £175.00 ......... £200.00

Here the variable cost per unit produced (in the previous reply £168 and £198 is divided by the % of total production that are fault-free)
Sandy
sandy@sandyhood.com
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(c) As we now know the selling price and the variable cost of each saleable unit we can find the contribution per unit for each
.....................................EXE..........WYE
Contribution per unit.........£25...............£50
Units Sold.....................3,200............2,344
Total contribution........£80,000.......£117,200

I hope this helps.
I had a total column in my answer, but the examiner didn't include on in his.
Sandy
sandy@sandyhood.com
www.sandyhood.com
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