Re fnpt

Terdoo

Task 1.7 a,b & c where do they get the figure from? the new cbt 2 , the contribution is £24 and Q c where do they get £2050000?

Thanks in advance

SandyHood

Rather than putting the answer and asking for an explanation, please can you post the question?

Terdoo

Marketing campaign is to be undertaken which will cost £300000,
Selling price was £40 which would reduced to £38, current sales is 100000 unit expected to increase at 125000 unit
Qc the marketing department is concerned that the volumes may not reach 125000 per period, what is the break even sales volume?
Fixed cost, contribution per unit and break even sales volume?
Sorry that I cannot type all the question
Thanks in advance

SandyHood

Terdoo
I start this reply with a specific criticism
I was able to copy the question for the mock exam and then type it up
I think you could have done the same

I am happy to help, but I prefer to help candidates who are prepared to make the effort needed to understand the subject first.

Criticism over.

You asked:

Task 1.7 a,b & c where do they get the figure from? the new cbt 2 , the contribution is £24 and Q c where do they get £2050000?

The fixed costs are

Fixed production costs ......................................................£1,200,000
Fixed admin costs .......................................-........................£300,000
Fixed selling and distribution costs............................-..............£250,000
This gives a total fixed cost (for the second part of 17 (a) ).. of £1,750,000


You then use the £24 contribution per unit (you calculated for the first part of 17 (a)) to calculate the break-even number of units: 72,917

You would find the contribution per unit by finding the price per unit and the variable cost per unit

In this case turnover for 100,000 units is £4,000,000 so the price is £40 per unit
And the material and labour are the only variable costs
D Material £1,000,000
D labour £600,000
In other words the total variable cost per 100,000 units is £1,600,000 so the variable cost per unit is £16

Price (£40) less variable cost per unit (£16) equals contribution per unit.

After the changes you are asked to answer 17 (b)
The extra revenue requires 3 sums
Revenue from selling 125,000 at £38
less Revenue from selling 100,000 at £40

This gives £750,000

The extra contribution is similar
Contribution under the revised approach £22 x 125,000
Less contribution under the original approach £24 x 100,000

£350,000

The extra profit
The extra contribution less the extra fixed cost of the marketing campaign(£300,000)

£50,000

Question 1.7 part (c)

The fixed costs: the original fixed costs we identified above as £1,750,000
The extra marketing campaign means that these increase by ......£300,000
Giving a total fixed cost of .................................................£2,050,000

The contribution per unit (we used in part (b)) was £22
This was found by:-
New price ................................................£38 per unit
Less variable cost per unit (we found earlier).. £16
Revised contribution per unit........................ £22

And the break even sales volume is found in the same way as in 17(a)
Total fixed costs in this case £2,050,000 = 93,182 units
contribution per unit.................£22

Terdoo

Thanks for your reply SandyHood.

Terdoo

Re; Fnpf

Hi SandyHood,

Could you please help with target costing on task 1.8 a, & b, in the same cbt2 sample paper, sorry that I cannot type the whole question here.
Sales price is £70
Labour is 1.5 @ £18.00
Overhead is £360000 @ £30000 unit
the require Profit margin is 30%
and then Q b answer

Thanks in advance

SandyHood

Sorry
I do not have time to look up the question
If you can type the question you would like me to answer, I will try to answer it.

Terdoo

Re: Target costing

sorry that I didn't get back to you sooner, here is the question;

Beta is considering designing a new product,
The price at which the product will be sold is £70, company expect to sell 30000 unit at a price of £70.00
Fixed overhead cost £360000, the labour requirement is 1.5 hour at a cost £18.00 per hour
a the total production cost per unit is £
b the target variable cost per unit is£
c the contribution per unit is£
d The required volume of sale ( assuming that the target variable cost per unit is melt to achieve a total profit of £800000 is ?

Thanks in advance

samblanchys

Kaplan Financial Performance book

Hi,

im just wondering if anyone can help me?

in the Kaplan combined text and workbook 2011-12 chapter 4 activity 6 is the answer right or wrong because when i worked it out i got a different answer to the book obviously i could be wrong so i asked other people who work in the industry and they got the same answer as me.

question:

A company is considering whether to buy a machine for £20,000 today with maintenance costs of £1,000 per year for 3 years. it will be sold at the end of the third year for £3,000. The company uses a discounted rate of 10%.

(a) what is the net present cost? (this is one im confused about)
(b) what is the terminal cost?

Answer:

(a) The net present cost is £24,739.

year 0 = (20000) * 1 = (20000)
year 1 = (1000) * 0.909 = (909)
year 2 = (1000) * 0.826 = (826)
year 3 = (4000) * 0.751 = (3004) <---- this is where im confused.

i understand they got the 4000 from adding the 3000 disposal to the 1000 maintenance cost but in other questions i have done i have always taken the residual/disposal amount away from the maintenance cost. So for my answer to year 3 i would have;

year 3 = 2000 * 0.751 = 1502.

If kaplan are right could someone please explain how.

Thanks,

Sam

SandyHood

Target Costing Question

a the total production cost per unit is £

Price less required profit margin

Price ............................................ £70.00
Required profit margin 30% ................£21.00
Target total production cost per unit ...£49.00

b the target variable cost per unit is£

Target total production cost per unit less fixed cost per unit

Target total production cost per unit .....£49.00
less Fixed cost per unit
Fixed cost................ £360,000........... £12.00
forecast units...............30,000..
Target variable cost per unit.................£37.00

c the contribution per unit

Price less variable cost per unit

Price .............................................. £70.00
Variable cost per unit .........................£37.00
contribution per unit ................-.........£33.00

d The required volume of sale

Total fixed costs plus required profit divided by contribution per unit

Total fixed costs .............................. £360,000
Required profit ................................. £800,000
Total contribution needed................. £1,160,000

Total fixed costs plus required profit.... £1,160,000......... 35,152 units
Contribution per unit............................ £33.00

SandyHood

NPV question

year cash flow disc F 10% ............PV
0 -20000...... 1...... ....................-20,000
1 -1000 ........0.909 .......................-909
2 -1000 ........0.826 ...................... -826
3 2000 ........0.751 .......................1,502
Net present value (cost)...............-20,232

The information you have given produces the NPV above confirming your suspicion that the book includes an error on this question.

Terdoo

Re target Costing

Thank you very much sandHood, but how do they work out the target variable material as £10 per unit?
Sorry to be a bother

Thank in advance

SandyHood

You know that

Target variable cost per unit.................£37.00

and that the

the labour requirement is 1.5 hour at a cost £18.00 per hour

We might have to assume that the variable cost is made up of only labour and material

In which case

variable cost per unit less labour cost per unit = material cost per unit

I think you can work that out yourself using this approach.