Financial Performance help with workings

WAD2001

Computer exam 4
Question 1
Could someone explain why the cost per unit for labour is £12.00 and not calculated as : if labour costs £12 per hour and it take 1.5 hours per unit should the cost per unit not be £18????
Or am I missing something completely obvious?

In the text it says each unit will take 1.5 hours at £12 per unit

expected production 1000 units

cost card says :
Qty :1500
cost per unit £12
Total 18000

I put Qty 1500
cost per unit £18
total £27000

Nps

Hi,

The question says 1.5 hours at £12 per unit, not per hour. So the cost per hour is actually only £8.

WAD2001

Hi Thanks

sorry I copied it down wrong the actual text on the exam says

Each unit will require 1.5 hours of labour at a cost of £12 per hour

if this is the case then the answer is wrong??? what do you think?

Nps

Right, can see where the confusion has occurred now. The second column in the table asks for the price per unit. It actually means the price per unit of whatever you are measuring, not the price per unit of Beta. So for material X, it is the price per kg of material, not the price per unit of Beta. Apply the same logic to the labour, and you can see the second column is asking for price per unit (ie. hour, not Beta). You then multiply the two columns together to get the total price for the 1000 units of Beta, hence 1500 hours x £12 per hour.

I agree that the question is confusing as it uses the term 'unit' in two different meanings, but if you look at what the format of the table is guiding you towards, it makes sense.

WAD2001

ha ha

Yes your right! thanks can see it now or alternatively 1000 units at my calculation of £18 per unit = £18000

And as you said in the context of the table it has to be written as per hour which is £12

I can see where I went wrong sometimes with these questions you have a tendency to over calculate it instead of thinking it through sensibly

Thanks again thought at last I had finally gone mad :tongue_smilie:

Nps

My pleasure!