MDCL

Zubair123

Can someone help me with variances please? (Sample assessment 1, task 2)

I can't seem to get the standard direct cost of actual production.

Bertie

Dude.......

I would have helped you. But without the question....


Think of your audience - you've just limited it to -

1) Students

2) Students studying AQ2016

Anisa97

MDLC Sample Assessment 1 Task 2b

Standard direct cost of actual production:
£25000 (apricots standard price) + £10000 (direct labour standard cost) divided by 5000 (budgeted production) = £7 standard direct cost. Multiply this by 6000 (actual production) gives £42000

Hope that helps

Zubair123

> @Bertie said:
> Dude.......
>
> I would have helped you. But without the question....
>
>
> Think of your audience - you've just limited it to -
>
> 1) Students
>
> 2) Students studying AQ2016

> @Anisa97 said:
> MDLC Sample Assessment 1 Task 2b
>
> Standard direct cost of actual production:
> £25000 (apricots standard price) + £10000 (direct labour standard cost) divided by 5000 (budgeted production) = £7 standard direct cost. Multiply this by 6000 (actual production) gives £42000
>
> Hope that helps

Thank you very much

Zubair123

> @Zubair123 said:
> > @Bertie said:
> > Dude.......
> >
> > I would have helped you. But without the question....
> >
> >
> > Think of your audience - you've just limited it to -
> >
> > 1) Students
> >
> > 2) Students studying AQ2016
>
> > @Anisa97 said:
> > MDLC Sample Assessment 1 Task 2b
> >
> > Standard direct cost of actual production:
> > £25000 (apricots standard price) + £10000 (direct labour standard cost) divided by 5000 (budgeted production) = £7 standard direct cost. Multiply this by 6000 (actual production) gives £42000
> >
> > Hope that helps
>
> Thank you very much

Can you help me with part c as well please?

Thanks

Anisa97

@Zubair123

Part C
Actual quantity of material used:
£900 (actual cost of material) + £168 (favourable material price variance) = £1068 (standard cost of material). Divide that by £12 (standard cost per kg) = 89kg

Standard labour rate per hour:
£12560 (actual labour cost) - £536 (adverse labour rate variance) = £12024 (standard cost of labour). Divide that by 668 (actual labour hours) = £18 per hour

Remember a favourable variance here means actual cost is less than standard cost, so to get the standard cost figure we add the variance. Easy to get mixed up!

Zubair123

Anisa97 said:

@Zubair123



Part C

Actual quantity of material used:

£900 (actual cost of material) + £168 (favourable material price variance) = £1068 (standard cost of material). Divide that by £12 (standard cost per kg) = 89kg



Standard labour rate per hour:

£12560 (actual labour cost) - £536 (adverse labour rate variance) = £12024 (standard cost of labour). Divide that by 668 (actual labour hours) = £18 per hour



Remember a favourable variance here means actual cost is less than standard cost, so to get the standard cost figure we add the variance. Easy to get mixed up!

Thanks again.

Might be back with a few more questions lol.

Anisa97

> @Zubair123 said:
> @Zubair123
>
>
>
> Part C
>
> Actual quantity of material used:
>
> £900 (actual cost of material) + £168 (favourable material price variance) = £1068 (standard cost of material). Divide that by £12 (standard cost per kg) = 89kg
>
>
>
> Standard labour rate per hour:
>
> £12560 (actual labour cost) - £536 (adverse labour rate variance) = £12024 (standard cost of labour). Divide that by 668 (actual labour hours) = £18 per hour
>
>
>
> Remember a favourable variance here means actual cost is less than standard cost, so to get the standard cost figure we add the variance. Easy to get mixed up!
>
> Thanks again.
>
> Might be back with a few more questions lol.

No problem, happy to help

Zubair123

Anisa97 said:

> @Zubair123 said:

> @Zubair123

>

>

>

> Part C

>

> Actual quantity of material used:

>

> £900 (actual cost of material) + £168 (favourable material price variance) = £1068 (standard cost of material). Divide that by £12 (standard cost per kg) = 89kg

>

>

>

> Standard labour rate per hour:

>

> £12560 (actual labour cost) - £536 (adverse labour rate variance) = £12024 (standard cost of labour). Divide that by 668 (actual labour hours) = £18 per hour

>

>

>

> Remember a favourable variance here means actual cost is less than standard cost, so to get the standard cost figure we add the variance. Easy to get mixed up!

>

> Thanks again.

>

> Might be back with a few more questions lol.



No problem, happy to help

Hi Anisa,

Sorry to bother you again but can you explain how I would work out question 1.5 (e) on sample assessment 1 please?

Anisa97

No need to apologise!

Task 5 e

y = a + bx
Production costs = y
Production volume = x

So a = fixed element and b = variable element
We can use the "high-low method" to calculate this

(£14000 - £5000)/(2000-200)= £5 variable cost per unit which is the value of "b"

£5 multiplied by 200= £1000 the whole variable cost for 200 units
£5000 (total cost) - £1000 (variable cost)= £4000 fixed cost which is the value of "a"

Zubair123

Anisa97 said:

No need to apologise!



Task 5 e



y = a + bx

Production costs = y

Production volume = x



So a = fixed element and b = variable element

We can use the "high-low method" to calculate this



(£14000 - £5000)/(2000-200)= £5 variable cost per unit which is the value of "b"



£5 multiplied by 200= £1000 the whole variable cost for 200 units

£5000 (total cost) - £1000 (variable cost)= £4000 fixed cost which is the value of "a"

Thank you.

Could you also explain how I would do 1.7 c & d, 1.8 a, b & c please?

Anisa97

Task 7 part c - could you post a screenshot of the question? I can only access the answers document from my phone right now, and it doesn't show which info was provided in the question..

Task 7 part d
Inventory holding period:
(122658+110000)/2= £116329 average inventory
122658+849200-110000= £861858 cost of sales
116329 divided by 861858, then multiplied by 365 = 49 days
Payables payment period:
Simply £118063 (payables) divided by £849200 (purchases), multiplied by 365 = 51 days

Task 8 part a & b - Likewise, can you post the question please

Task 8 part c
Profit at the current situation:
5000 x £150 = £750000 (sales) less
6 x £10 x 5000 = £300000 (direct labour)
3 x £5 x 5000 = £75000 (direct materials)
Fixed costs given at £277500
Profit therefore = £97500

Profit with the new situation:
5000 x £150 = £750000 (sales) less
4.80 (20% lower hours) x £10 x 5000 = £240000 (direct labour)
2.55 (15% lower usage) x £5 x 5000 = £63750 (direct materials)
£277500 + £79500 = £357000 (fixed costs)
Profit = £89250

Does it make sense?

Zubair123

Anisa97 said:

Task 7 part c - could you post a screenshot of the question? I can only access the answers document from my phone right now, and it doesn't show which info was provided in the question..



Task 7 part d

Inventory holding period:

(122658+110000)/2= £116329 average inventory

122658+849200-110000= £861858 cost of sales

116329 divided by 861858, then multiplied by 365 = 49 days

Payables payment period:

Simply £118063 (payables) divided by £849200 (purchases), multiplied by 365 = 51 days



Task 8 part a & b - Likewise, can you post the question please



Task 8 part c

Profit at the current situation:

5000 x £150 = £750000 (sales) less

6 x £10 x 5000 = £300000 (direct labour)

3 x £5 x 5000 = £75000 (direct materials)

Fixed costs given at £277500

Profit therefore = £97500



Profit with the new situation:

5000 x £150 = £750000 (sales) less

4.80 (20% lower hours) x £10 x 5000 = £240000 (direct labour)

2.55 (15% lower usage) x £5 x 5000 = £63750 (direct materials)

£277500 + £79500 = £357000 (fixed costs)

Profit = £89250



Does it make sense?

Thanks and yeah that makes total sense

Task 7 c

A business with receivables of £120,000 & receivable collection period of 30, operates on a gross profit margin of 25% & a net profit margin of 15%. Fixed production overheads constitute 40% of the cost of sales.

SALES -
VARIABLE PRODUCTION COSTS -
FIXED PRODUCTION COSTS -
COST OF SALES -
GROSS PROFIT -
NON PRODUCTION COSTS -
NET PROFIT -

Task 8 a

Per unit Jackal (£) Hyena (£)
Direct materials at £5 per kg 10 15
Direct labour at £6 per hr 6 12
Variable overheads 2 4
Fixed production overheads 2.27 3.63
Selling price 25 40
Sales demand 5000 10000

Total materials required -
Total labour hours required -
Contribution per unit (£) -
Contribution per limiting factor (£) -
Optimal production (units) -

Task 8 b

What is the maximum that would be paid for each of the following?

5000 kg of additional material -
5000 hrs of additional labour -

Thanks.

Anisa97

Task 7 c

Sales - we need the full years sales so £120000 receivables) divided by 30 (collection period), multiplied by 365= £1460000
Gross profit - 25% of Sales which is £365000
Sales less Gross Profit is the Cost of Sales figure = £1095000
Fixed overheads - 40% of Cost of Sales which is £438000
This means the rest (60%) is variable overheads = £657000
Net Profit - 15% of Sales which is £219000
The difference between Gross Profit and Net Profit is therefore the Non Production Costs figure = £145000

Task 8 a

Total materials required for Jackal (kg):
£10 (cost per unit) divided by £5 (cost per kg), multiplied by 5000 (sales demand) = 10000kg
For Hyena:
15/5*10000= 30000kg

Total labour hours required for Jackal:
£6 (cost per unit) divided by £6 (cost per labour hour), multiplied by 5000 (sales demand) = 5000hrs
For Hyena:
12/6*10000= 20000hrs

Contribution per unit for Jackal:
Simply sales price less variable costs per unit. £25 - £10 - £6 - £2 = £7
For Hyena:
£40 - £15 - £12 - £4 = £9

Contribution per limiting factor for Jackal:
I'm assuming the limiting factor is labour and the hours available is 20000 hours?
£7 (contribution per unit) divided by 1 (1 hour needed per unit) = £7
For Hyena:
£9 divided by 2 (2hrs needed) = £4.50

Optimal production:
Jackal has a higher contribution than Hyena so all of the sales demand will be met which is 5000 units. 15000 of the 20000 labour hours remain
15000 divided by 2 (hours needed per unit of Hyena) = 7500 units

Task 8 b

Nothing will be paid for 5000kg of additional material because it's not the limiting factor and all demand has been met
The maximum that would be paid for 5000 additional hours is 4.50 (contribution per limiting factor for Hyena) multiplied by 5000= £22500

Let me know if anything doesn't make sense -
though I'm only a student doing my best to explain, hopefully correctly!

Zubair123

Anisa97 said:

Task 7 c



Sales - we need the full years sales so £120000 receivables) divided by 30 (collection period), multiplied by 365= £1460000

Gross profit - 25% of Sales which is £365000

Sales less Gross Profit is the Cost of Sales figure = £1095000

Fixed overheads - 40% of Cost of Sales which is £438000

This means the rest (60%) is variable overheads = £657000

Net Profit - 15% of Sales which is £219000

The difference between Gross Profit and Net Profit is therefore the Non Production Costs figure = £145000



Task 8 a



Total materials required for Jackal (kg):

£10 (cost per unit) divided by £5 (cost per kg), multiplied by 5000 (sales demand) = 10000kg

For Hyena:

15/5*10000= 30000kg



Total labour hours required for Jackal:

£6 (cost per unit) divided by £6 (cost per labour hour), multiplied by 5000 (sales demand) = 5000hrs

For Hyena:

12/6*10000= 20000hrs



Contribution per unit for Jackal:

Simply sales price less variable costs per unit. £25 - £10 - £6 - £2 = £7

For Hyena:

£40 - £15 - £12 - £4 = £9



Contribution per limiting factor for Jackal:

I'm assuming the limiting factor is labour and the hours available is 20000 hours?

£7 (contribution per unit) divided by 1 (1 hour needed per unit) = £7

For Hyena:

£9 divided by 2 (2hrs needed) = £4.50



Optimal production:

Jackal has a higher contribution than Hyena so all of the sales demand will be met which is 5000 units. 15000 of the 20000 labour hours remain

15000 divided by 2 (hours needed per unit of Hyena) = 7500 units



Task 8 b



Nothing will be paid for 5000kg of additional material because it's not the limiting factor and all demand has been met

The maximum that would be paid for 5000 additional hours is 4.50 (contribution per limiting factor for Hyena) multiplied by 5000= £22500



Let me know if anything doesn't make sense -

though I'm only a student doing my best to explain, hopefully correctly!

Thanks again. Much appreciated.

It all makes perfect sense now. Thank you.

You explained it all better than my tutor did lol.

Anisa97

You're welcome, glad to hear that it all makes sense

Zubair123

Anisa97 said:

You're welcome, glad to hear that it all makes sense

Hi Anisa,

Is it okay if you could explain how I would complete questions 1.3 & 1.4 from sample assessment 2 please?

Thanks

Anisa97

Hi Zubair

Please post the question for Task 3
I think I've explained a similar question to Task 4 before, I'll find it and send you the link