# PEV 2.2 Question

Registered Posts: 48 ? ? ?

a) Calculate the following information for the demand level of 10,000 turbines per annum:
(i) full production cost per turbine manufactured by Voltair, using your relevant

What answer do you use from 2.1 a?

(i) Full production cost per turbine based upon production of 10,000 turbines = £800 (£8M/10,000).

But I CAN NOT see anything that resembles this in 2.1a

(a)

Scenario 1 Scenario 2
Gross profit margin 36.00% 28.57%
Net profit margin 17.20% 11.79%
Direct materials cost per unit £300.00 £300.00
Direct labour cost per unit £200.00 £200.00
Fixed production cost per unit £300.00 £214.29
Gearing* 58.82% 57.36%
Interest cover 4.58 3.75

Gearing 1.43 or 143% 1.35 or 135%

Laura
x

• Registered Posts: 668
£800 is the total of the left hand fingers here:

Direct materials cost per unit £300.00 £300.00
Direct labour cost per unit £200.00 £200.00
Fixed production cost per unit £300.00 £214.29

ie add the three together and you will get the full cost per turbine.

The alternative method of 8M/10,000 is a sum of the three relevant figures given in the scenario data itself divided by the total number of turbines.

Hope this helps
• Registered Posts: 125 ? ? ?
Laura88 wrote: »

a) Calculate the following information for the demand level of 10,000 turbines per annum:
(i) full production cost per turbine manufactured by Voltair, using your relevant

What answer do you use from 2.1 a?

(i) Full production cost per turbine based upon production of 10,000 turbines = £800 (£8M/10,000).

But I CAN NOT see anything that resembles this in 2.1a

(a)

Scenario 1 Scenario 2
Gross profit margin 36.00% 28.57%
Net profit margin 17.20% 11.79%
Direct materials cost per unit £300.00 £300.00
Direct labour cost per unit £200.00 £200.00
Fixed production cost per unit £300.00 £214.29
Gearing* 58.82% 57.36%
Interest cover 4.58 3.75

Gearing 1.43 or 143% 1.35 or 135%

Laura
x

Hi Laura,

I think it is all the below added togather??

Direct materials cost per unit £300.00
Direct labour cost per unit £200.00
Fixed production cost per unit £300.00 = £800.00
• Registered, Moderator Posts: 2,034
Here is my response from
SandyHood wrote: »
based on turbines produced ................................................. 10,000........................... 14,000
Full production cost per turbine manufactured by Voltair ............. £.................................. £
Direct (raw) materials....................................................... 300.00 ........................... 300.00
Direct labour cost ........................................................... 200.00 ............................ 200.00
Fixed production ohds....................................................... 300.00 ........................... 214.29
....................................................................(a) (i)........ 800.00 .......... (b) (i) ....... 714.29
....................................................................... Total............... per unit............ Total........... per unit
..........................................................................£..................... £................. £..................... £
Total fixed production overhead........................ 3,000,000 .............. 300 ........... 3,000,000 ........... 214.29
Specific (avoidable fixed production cost)........... 1,950,000 .............. 195 ........... 1,950,000 ........... 139.29
Unavoidable cost per turbine ........................... 1,050,000 .............. 105 ........... 1,050,000 ............. 75.00
.............................................................................................. (a)(ii)...................................... (b) (ii)
Avoidable production cost per turbine ............................... .............. £............................................. £
Direct (raw) materials................................................................ 300.00 ................................... 300.00
Direct labour cost .................................................................... 200.00 ................................... 200.00
Specific (avoidable fixed production cost)...................................... 195.00 ................................... 139.29
.................................................................................. (a) (iii) 695.00 ......................... (b) (iii) 639.29

Laura88