Financial Performance

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Registered Posts: 95 Regular contributor ⭐
Hello

I am revising for the above and i am getting stuck with two things which i think maybe easy to sort out.

1) Standard cost cards, for the life on me i can never get my answers the same as the past papers.
2) Target costing

Shell B

• Registered, Moderator Posts: 2,034 mod
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Shell

If so, the fact that you have different answer to the past paper is of no consequence.

Are you finding the standard cost of a unit of a product using 4 columns?
1. The inputs Materials, Labour, Overhead
2. The amount of each input needed per unit of finished product
3. The cost per kg/hr etc
4. the cost per unit of out put with the total cost at the bottom of the column.

Are you finding target cost by selling price less required profit?
And then the individual cost elements, once you have the target cost?
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 95 Regular contributor ⭐
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for the cost card i have been doing the following, think its more or less how you have said.

QTY Cost per unit Total
Material
Labour
total

for example if it says prepare a cost card for 10,000 bars of soap, am i doing cost for just 1 bar????? i think i am getting somthing really simple wrapped around my head i am looking at the june 2009 paper task 1.2

As for target costing i understand you have to take the target profit away from the selling price but i just dont understand the tables in the osbourne workbooks, not sure if you have one but in assessment 1 at the back there is a table which looks like this

Sales price per unit
Profit Margin
Total cost
Fixed cost per unit
Material cost per unit
Max labour cost per unit
Target labour time per unit (minutes)

is that enough info for you to help me or do you need some more????

Thanks for the help again
• Registered, Moderator Posts: 2,034 mod
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Shell
The cost card would be for 10,000 bars of soap.

So Material (amount needed for 10,000 bars in kgs) cost per kg Cost
etc

The target cost question appears to be asking for the maximum time you could take making each unit

So:
• Find the target total cost per unit
• take off the fixed cost per unit
• this leaves the total variable cost per unit
• take off the material cost per unit
• this gives you the max labour cost per unit
• Then divide the labour rate per hour by the max labour cost per unit
• That ought to give you the max labour time

See what you make of this:
Market price per unit: £25.00
Required profit margin: 20% of price

Fixed cost per unit (at forecast volume) £11.00
Material cost per unit £5.25
Labour rate per hour £15.00

How much time can be allocated to producing each unit?
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 95 Regular contributor ⭐
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hello Sandy

this is what i got (sorry for late reply)

Sale Price £25.00
Profit Margin £5.00
Total cost - £20.00
Fixed cost - £11.00
Material - £5.25
Labour - £3.75
Time 4mins

I hope thats right
• Registered, Moderator Posts: 2,034 mod
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£3.75 per unit = 0.25 hours per unit (which is where I would leave it) but if you insist on minutes then x 60 = 15 mins
£15.00 per hr
Sandy
sandy@sandyhood.com
www.sandyhood.com