Help with June 08 Paper ECR

Eddie
Eddie New MemberRegistered Posts: 5
Task 2.4

Machine hours/Unit 0.20 for product A and 0.08 for B
Contribution/ Machine hr 5.75 and 7.75

Where these figures come from?

How do I allocate the machine hours?

Thank you:thumbup:

Comments

  • Eddie
    Eddie New Member Registered Posts: 5
    The same paper task 2.5

    The cumulative pcash flow figures:

    Cumulative (600) (410) 45 335
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Machine hours/unit

    Product A have the following details (p16 data for 2.2)
    Units made and sold 300,000
    Machine hours required 60,000

    60,000 hours = 0.2 hours per unit
    300,000 units

    I've done Product A, can you now do Product B?
    Sandy
    [email protected]
    www.sandyhood.com
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Contribution/ Machine hr

    Your own answer to 2.2 would be the starting point here

    ..................................................A (£)
    Selling price per unit---.............--- 1.50
    Less: variable costs per unit
    • Direct materials ---.................---0.20
    • Direct labour ---....................--- 0.12
    • Variable overheads--......--....---- 0.15
    Total variable cost per unit--......----0.47
    I inserted this row
    Contribution per unit--...............----1.03
    Sandy
    [email protected]
    www.sandyhood.com
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Contribution/machine hour

    Contribution/machine hour
    £1.03 per unit divided by 0.2 machine hours per unit
    =£5.15 per machine hour
    (not £5.75 as you suggested)
    I hope this helps and shows you enough to be able to do the same with product B.
    Sandy
    [email protected]
    www.sandyhood.com
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    How do I allocate the machine hours?

    In this question there are 70,000 machine hours available.
    Product B has the higher contribution per hour so we allocate as many hours as possible to produce it. The forecast sales are the limit (afterall we don't want to make products we can't sell)
    The data for task 2.2 states that sales maximum are 500,000 units and
    40,000 hours
    500,000 units = 0.08 hours per unit
    So 0.08 hours per unit x 500,000 units = 40,000 hours allocated to Product B production
    This leaves 70,000 - 40,000 = 30,000 available for Product A production
    Sandy
    [email protected]
    www.sandyhood.com
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    The cumulative cash flow figures

    The cumulative cash flow figures means a running total
    In year 0 net cash flow (£600,000)
    In year 1 Net cash flow £190,000, running total (£410,000)
    In year 2 Net cash flow £455,000, running total £45,000
    and so on

    I hope these responses help make the paper clearer.
    Sandy
    [email protected]
    www.sandyhood.com
  • Eddie
    Eddie New Member Registered Posts: 5
    Thank you very much Sandy. I the same paper, task 1.4, why the equipment and maintenance are reaportioned equally and the stores not? I don't get these figures ( stores)

    I feel completely hopeless!! thank you for your help. I am quite pesimistic.
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    You have to do what the task specifies. This has a clear note immediately below the task.
    Note:
    The Equipment Maintenance department’s total costs should be apportioned equally to the other three departments. Then the total of the Stores department’s costs should be apportioned according to the number of material requisitions.

    I am beginning to suspect you are looking at the model answers, my advice is to focus on the question. In fact, I'd probably not even look at the model answer.
    Sandy
    [email protected]
    www.sandyhood.com
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