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PDSY Assessment 1 Task 1.4

Hi all,

I am having some difficulity in working out the answers for Task 1.4 on Assessment 1 of PDSY. I have attached the question in excel format, and there are a further 2 questions on this task asking for the best price out of products, as well as a written question to discuss the potential impact of proposed policy on the business.

I might be having a complete blonde moment, but could really do with some guidance (exam fast approaching, and not a lot of confidence!).

Many thanks in advance,

Fee x

Comments

  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 116
    Ok so first you need to work out your marginal costs.

    You are told that the variable element of production overheads is equal to 15% of the direct costs. Therefore, for NP1, your direct costs are £18.00 + 15% = £20.70. For NP2, it will be £42.00 + 15% = £48.30

    Now use this information to work out the rest.

    So to undercut the competition
    NP1 The competition is £21.00 x 250 = £5,250 but for SL Products, using the marginal cost it would be £20.70 x 250 = £5,175. 5,250 - 5,175 = £75

    NP2 The competition is £52.00 x 600 = £31,200 but for SL Products, using the marginal cost above, it would be £48.30 x 600 = £28,980. 31,200 - 28,980 = 2,220

    Use this logic for market price and spreadsheet price.

    Hope this helps.
    Fee2019
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