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Unit 9 December 2005 Pcr

zoeeileenzoeeileen Settling In NicelyRegistered Posts: 19
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

Comments

  • SandyHoodSandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    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
    [email protected]
    www.sandyhood.com
  • SandyHoodSandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    (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
    [email protected]
    www.sandyhood.com
  • SandyHoodSandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    (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
    [email protected]
    www.sandyhood.com
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