# financial performance question???

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Registered Posts: 28 Regular contributor ⭐
Hi.

Can anyone help. I am doing the quiz on the osbourne website, however it doesn't give you the answer, just states that you are worng... can anyone help with this?

The following information has been calculated for the production of 1 unit of Gamma
• Each unit will require 0.35 kilograms of material at a total cost of £14.00
• Each unit will require 45 minutes of labour at a cost of £12.00 per hour
• Fixed overheads total £63,000 and the estimated output will be 12,000 units of Gamma
• Fixed overheads are absorbed on a labour hour basis

Labour, so I have done
12.00/0.45 = £26.67 cost per unit
Fixed cost
0.45 x 12,000 units = 5400
63000/5400 = 11.67 total cost

but it is telling me I am wrong! Can anyone help/explain better than me???

Thanks

• Registered Posts: 466 Dedicated contributor 🦉
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Hi,

Can't be sure this is correct but here is my answer:

12,000 Units @ 45minutes each = 9,000 Hours (12,000 * 0.75)

OAR = £ 63,000 / 9,000 Hours = £ 7 per labour hour

Cost Card:
Materials: £ 14.00
Labour: 12.00 * 0.75 = £ 9.00
F/Overheads: £7 * 0.75 = £ 5.25

Total Standard Cost 1 Unit = £ 28.25
• Registered Posts: 72 Regular contributor ⭐
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material per unit: 0.35kg, which costs £14.00, so cost per unit(kg) = 14/0.35 = 40

labour: 45mins @ £12ph, so total cost = 12 *0.75 (or 12*45/60) = 9.00

Fixed cost per unit = 63,000/12,000 = 5.25
absorbed on a labour hour basis, ie 5.25 is for 45 minutes, so per hour is 5.25/0.75 = 7.00

Total = 14+9+5.25 = 28.25

1 unit of gamma.........Quantity.........Cost per unit £..........Total cost £
material......................0.35kg......................40.00..................14.00
labour.........................0.75hr......................12.00....................9.00
fixed costs...................0.75hr........................7.00....................5.25
totals...................................................................................28.25
• Registered Posts: 174 Dedicated contributor 🦉
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Material: £14.00 per unit
Labour: £12.00 * (45/60) = £9.00 per unit
Overheads: £63,000/12,000 = £5.25 per unit
Total cost: £28.25 per unit

"Cost per unit" means "Cost per KG/hour"
"Total cost" means "Cost per unit"
• Registered Posts: 72 Regular contributor ⭐
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haha, you beat me to it Crispy
• Registered Posts: 466 Dedicated contributor 🦉
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Heh - Im just pleased I was able to give an answer that actually looks correct

It feels like my brain is slowly turning into mush looking through boring old invoices this morning
• Registered Posts: 28 Regular contributor ⭐
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thanks everyone, guess it's me being stupid as you all got the same answers!!!