PCR JUNE 2005 NEED HELP SECTION 2 2.1 (D)

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi,
I was just wondering whether someone could explain to me how the stepped cost : quality control is calculated as I cant work it out! Normally I am fine with stepped costs!
Thanks

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR JUNE 2005 NEED HELP SECTION 2 2.1 (D)

    Not got the paper with me but is that the one with the quality supervisors? i.e. paid for every £50,000 or something like that? I think if i remember correctly as they aren't paying enough they are risking making quality worse?

    Sorry if this is completly off, hopefully someone with the question paper can help you out.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR JUNE 2005 NEED HELP SECTION 2 2.1 (D)

    The stepped cost is based on the number of units produced. The question requires a revised operating statement based on the actual production of 380,000 units.

    As the quality control costs £120,000 for every 100,000 units produced when flexing the budget we must include enough quality control for all 380,000 units. This means we have to provide for 400,000 units as it is a stepped cost.

    This gives us the answer of £480,000
    being 120,000 x 400,000/100,000

    Hope that makes sense

    Good luck
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR JUNE 2005 NEED HELP SECTION 2 2.1 (D)

    Many thanks for that answer , I understand it now!

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