URGENT HELP -PEV JUNE2005

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi all,
I do appreciate that most people are quite busy revising at the moment, but I have spent the past 5 hrs trying to work out the June 2005 past paper and seem to come to a head block with Task 2.2. Proposal on the sub-contract of Model H stove. I have checked the answers and still cannot figure out how this has been worked out. I don't want to be wasting any more valuable time looking at the same thing over and over again. CAN SOMEONE PLEASE FIND IT IN THEIR HEART TO HELP. YOU CAN EMAIL ME ON ormattiger@yahoo.co.uk
lol
lollypops

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:URGENT HELP -PEV JUNE2005

    This question is a nightmare for me too. I can sort of understand the answer but even now I wouldn't think to calculate it that way.

    I can see how the contribution is currently £122.35 but after that i get lost. I don't think I've had any practice questions like it.

    I am worried about section 2 of the PEV exam. I know I can pass section 1 but if I don't get enough marks in section 2 then I will fail!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:URGENT HELP -PEV JUNE2005

    This is the answer that we were given in a revision class:

    Total Profit BEFORE: £49000 (F) + £46800 (H) = £95,800

    Now calculate .........

    Profit AFTER H subcontracted

    Contribution from F £343,000
    Contribution ffom H (£220 - £180) * 900 £36,000
    TOTAL CONTRIBUTION £379,000

    Production o/hs (294,000 + 43,200) (£337,200)
    Savings in Fixed prodn o/hs £78,000
    Savings in stock holding £12,000
    Profit AFTER subcontracting £131,800
    Therefore based on above subcontract.

    We were advised to make a decision by looking at profit before and then profit after.

    The answer actually given has more of an explanation to the answer above so I would probably add more of an explanation to it considering that the exam requires a report.

    I hope this helps.

    Good Luck.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:URGENT HELP -PEV JUNE2005

    I don't think the examiner makes it clear in his answer.

    Lollypops
    I actually reached the opposite conclusion to him on this question, but I can see his approach.

    This is the way I recommend (and the way he did it) and the key lies in break even analysis from intermediate
    I am sure other approaches would have been acceptable

    Find the total saving you make in monthly fixed costs from the sub-contract deal
    £78,000 (MD)
    +£1,000 (FD)

    Then find how the contribution per Model H stove will fall if we subcontract
    Using April's figures this is £122.35 (£220- £97.65)
    Using the subcontactor £220-£180 = £40

    The decrease is £82.35 per stove

    Then divide the Fixed cost saving by the fall in contribution per unit
    this gives you 959 stoves
    If you expect to sell fewer than this (and there is no evidence in the question to doubt this) you would save more from the fixed costs than you would lose from the contribution being lower so you should sub-contract

    The examiner seems to think sales over 1000 can be achieved, and you may agree. If so, then subcontacting would cost more in lost contribution than it would save in lower fixed cost

    You have my email. Contact me if you want more

    Sandy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:URGENT HELP -PEV JUNE2005

    Thanks Sandy and Rupki,
    I will go and have a look at this now and if I have anymore problems I will let you know. This forum is such a valuable tool during this time. I really appreciate this .
    lollypops

Categories

Privacy Policy