MDCL

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.

Comments

  • BertieBertie West Midlands Posts: 376Registered
    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



  • Anisa97Anisa97 Posts: 42MAAT
    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
    Zubair123bushra
  • Zubair123Zubair123 Posts: 19Registered
    > @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
  • Zubair123Zubair123 Posts: 19Registered
    > @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
  • Anisa97Anisa97 Posts: 42MAAT
    @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!
  • Zubair123Zubair123 Posts: 19Registered
    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.
  • Anisa97Anisa97 Posts: 42MAAT
    > @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 :)
  • Zubair123Zubair123 Posts: 19Registered
    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?
  • Anisa97Anisa97 Posts: 42MAAT
    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"
  • Zubair123Zubair123 Posts: 19Registered
    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?
  • Anisa97Anisa97 Posts: 42MAAT
    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?
  • Zubair123Zubair123 Posts: 19Registered
    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.
  • Anisa97Anisa97 Posts: 42MAAT
    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!
  • Zubair123Zubair123 Posts: 19Registered
    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.
  • Anisa97Anisa97 Posts: 42MAAT
    You're welcome, glad to hear that it all makes sense :)
  • Zubair123Zubair123 Posts: 19Registered
    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
  • Anisa97Anisa97 Posts: 42MAAT
    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
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