1. The standard cost of material for manufacturing a unit of a particular product PEE is estimated as follows: 18 kg of raw material @ AED 2 per kg.

On completion of the unit, it was found that 21 kg. of raw material costing AED 1.75 per kg has been consumed. Compute Material Variances (5 Marks)

2. Sales units 20,000 units

Selling Price (per unit) AED 10

Variable Cost (per unit) AED 8

Fixed Cost AED 10,000

Calculate

1. P/V Ratio (ii) Break Even Sales (iii) Margin of Safety (iv) Margin of Safety ratio (5 Marks)

3. Asha Ltd. is producing a part at a cost of AED 70 per unit. The composition of the cost is as follows:

Materials 50.00

Wages 10.00

OverheadsVariable 5.50

Fixed 4.50

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Total 70.00

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Presently, the firm has been incurring a total fixed cost of AED 30,000 for manufacturing the current production of 11,000 units. An outsider is offering the same component, in all aspects identical in features, for AED 67per unit. On enquiry, it is found from the firm that the machine that is manufacturing the parts would remain idle as the machinery cannot be utilized elsewhere.

(A) Should the offer be accepted?

(B) Would your answer would be different, if the outside firm reduces the price to AED 64, after negotiation. What is the impact of the fixed costs in the decision-making process? (10 Marks)

Note : Answers should be in Excel or Word Format