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SolnsMidsem2009_1

# SolnsMidsem2009_1 - 1 Solutions to Practice Mid-session...

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1 MidSessionPracticeQuestionGuidance 09/04/2008 Solutions to Practice Mid-session Questions QUESTION 1 (a) The most common mistake was that students forgot to calculate the cost per activity. Some students also failed to follow instructions about calculations (keep numbers to 2 decimal points). Allocate Resources to Activities Job Size Estimating and Job Setup Dealing with Nonroutine Jobs Other Total Wages and salaries 220,000 55,000 165,000 110,000 550,000 Disposal fees 510,000 - 340,000 - 850,000 On-site supplies 46,750 25,500 8,500 4,250 85,000 776,750 80,500 513,500 114,250 1,485,000 Calculate cost per activity Total Cost Quantity of Activity Cost Per activity Job size 776,750 125,000 6.21 Estimating and job setup 80,500 650 123.85 Dealing with non-routine jobs 513,500 200 2,567.50 1,370,750 (b) Common mistakes: people did not treat costs appropriately, or forgot to include certain costs altogether e.g. ., they only calculated costs associated with square metres. i. Cost for a routine job: 100 sq metres Job size 621.00 Estimating and job setup 123.85 Dealing with non-routine jobs - 744.85 ii. Cost for a nonroutine job: 100 sq metres Job size 621.00 Estimating and job setup 123.85 Dealing with non-routine jobs 2,567.50 3,312.35 (c)

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2 MidSessionPracticeQuestionGuidance 09/04/2008 This is the section where marks tended to be lost. An average answer was one that said the student disagreed because non-routine jobs would cost more than the quoted price using the current policy (marks were also given if students had made mistakes with calculations earlier that led them to argue the opposite). A really good answer was one that noted that the largest component of the cost of a non-routine job was not related to square metres, and that ABC reflects this because it takes into account the different resource usage of different activities (whereas the current policy does not). ABC calculations in part (b) clearly showed this to be the case, and yet students often used calculations on a per metre basis to justify their answers. Some students said that if we look at average cost the situation is okay. However averaging out costs between the two types of job in order to make a recommendation is against what we have tried to emphasise at various stages throughout this course – that in order to make correct decisions (pricing and others) that do not cause us to lose customers (or make them very unhappy) we should be looking at the specific case for each product/service (unless ABC calculations demonstrate that the difference is immaterial). In addition, part (b) was asking for two particular situations where area size was 100 square metres - if the area is different (as you would expect where you take on a range of different jobs), the average will change – in
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SolnsMidsem2009_1 - 1 Solutions to Practice Mid-session...

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