Edit Format Window File Data Help Excel View Insert Tools AutoSave OFF AC. DAP ... Copy of MCT Insert Draw Page Layout Formulas Data Review View Automate Home Arial 10 V A = ab Wrap Text = ACH Paste I U V v 4 Merge & C C17 X V I LL CO Make or Buy Cost Buy 7,800 * 6.7 11 52,260 Make 7,800 4.8- 37.440 Lost contribution 580 25 14,500 51,940 Question Solution Workings Part B + Select destination and press ENTER or choose Paste O MAR 29Cop AutoSave O OFF A C . O AP ... Data View Home Insert Draw Page Layout Formulas Review 9 A Arial Paste I U V 4 > F24 X V x =B19 T LL WU O 4 Marginal costing statements 1 C/S ratio = contribution sales 63% 2 If, contribution = fixed costs + profit c = fc + p Then, FC = Contribution - profit fc = c - p Fixed costs Contribution profit 164 63% 35% 164 28% 3 Therefore, as sales = 100% Sales 100% 164 1 28% 591 Question Solution Workings Part B + Select destination and press ENTER or choose Paste MAR 29Excel AutoSave OFF ACY . DAP ... Copy of MC Page Layout Formulas Data Review View Automate Home Insert Draw = Arial v 10 VAA ab Wrap Te Merge & Paste V V 4 123 X V I Marginal costing statements Original Proposal 1 Proposal 2 Units 000s 30 44 26.813 E E000 CH E0OO EOOO Sales 18.00 540 15.75 693 22.05 591 Variable costs: Direct materials 3.60 108 3.60 158 3.60 Direct labour 2.60 78 2.60 114 2.60 . 70 Variable overhead 1.87 56 1.87 82 2.02 54 Total variable cost 8.07 242 8.07 355 8.22 220 Contribution 9.93 298 .68 338 13.83 371 Fixed costs: 20 Production overhead 80 21 Administration overhead 80 44 44 22 Selling overhead 30 30 40 23 Total fixed costs 154 154 24 164 25 Profit 144 184 207 Percentages 100% Question Solution Workings Part B + Select destination and press ENTER or choose Paste ? MAR 29Formulas Data Review Page Layout Home Insert Draw 101 Arial em I v v v Paste X V 540 I LL 2 The summarised income statement for Ravinder Lid, based on a budgeting selling price per unit is as follows: EOOO E000 E Sales 18 per unit 540 Direct materia Direct wages 78 Variable overhead Fixed production overhead 80 Fixed administration overhead 44 8 Fixed selling overhead 396 Profit 144 15 At a recent board meeting the directors discussed various options in order to improve profitability and these 16 are as follows 1 In order to take into account the current economic conditions Reduce selling price by 12.5% Change sales volumes to 44 (000) units 2 Increase marketing costs by (EOOO) 10 Increase selling price by 22.5% Increase variable overheads by 8% Setting a profit margin of 35% 28 Required: Prepare marginal costing statements and a report to inform management of the consequences of the above alternative courses of action. Your report should also 8 858 8 8 38 make reference to qualitative factors as well as quantitative factors Part B The firm is considering whether to make or buy component MD4 Quantity required Purchase price per unit 7,800 units Marginal production cost per unit 4.80 The component would have to be made on a machine which is currently working at will be reduced. full capacity. If the firm decides to make the component, sales of a finished product Model CEO sales reduced by marginal cost 580 units 65 8 Required Selling price 90 Recommend whether the firm should make or buy the component, referring to any qualitative factors which may affect the decision. Question Solution Workings Part B Select destination and press ENTER or choo