Assessment 2 - budgeting

Zobiah97

Help on question 1.7 d, practise assessment 2 with workings please

sk2022

Hi,

So you have been told the following information :

Current warehouse cost of £500,000
Annual Capacity of existing Warehouse = 750,000 Units
Annual Cost of each additional warehouse unit = £150,000
Annual capacity of each additional warehouse unit = 100,000 units
Administration fee for each additional warehouse unit = £5,000

Production budget you have been told is 960,000 units

So far existing only takes 750,000 units so we need to still store 210,000 units.

We have been told each additional unit can hold 100,000 units, if we requested for 2 warehouse units, it would hold 200,000 units so we are still 10,000 short. We would need to request for 3 warehouse units giving us additional space.

We have then been told that each additional unit costs £150,000 so we need 3 units it would be £150,000 x 3 = £450,000

Admin fee of each unit is £5,000. So as we need 3 units it would be £5,000 x 3 Units = £15,000.

Now the budget cost would be :

£500,000 (current cost) + £450,000 (additional units) + £15,000 (Admin fee) = £965,000

Do let me know if this is correct