2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
DH Limited manufactures a single product. The following information is available for one unit of that product: $ Selling price Direct material Direct labour Variable overhead Fixed overhead Budgeted production is 200 000 units per annum. REQUIRED Calculate the annual break-even point in units. Calculate the total budgeted annual contribution and total budgeted annual profit. Additional information The directors are considering reducing the selling price of the product by 10%. The new selling price would be lower than that of competitors. The directors are confident that as a result of this, sales volume would increase by 50%. In order to produce the budgeted units, the company’s labour force is currently working at 80% capacity. Workers will be paid an overtime premium of 25% for all production over 100% capacity. The additional production would enable the company to qualify for 12.5% discount on all direct materials. The revised production would result in the fixed overhead cost per unit reducing by 30% for all units produced. REQUIRED Calculate the total budgeted annual profit if the directors proceed with their plans. Calculate the revised break-even point in units if the directors proceed with their plans. Calculate the margin of safety in units and as a percentage if the directors proceed with their plans. Advise the directors whether or not they should proceed with their plans to reduce the selling price. Give reasons for your answer. Additional information The company has used the same direct material supplier for many years, but the directors have now been informed that there will possibly be a shortfall of available material in the next six months. They have sourced an alternative material from a new supplier at the same price. REQUIRED State three issues the directors should consider before changing a supplier. Additional information The directors of DH Limited also use absorption costing. REQUIRED State the meaning of each of the following terms. Allocation Apportionment Absorption
9706_w18_qp_21
THEORY
2018
Paper 2, Variant 1
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