All other information detailed in a and b still applies except that the

# All other information detailed in a and b still

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All other information detailed in (a) and (b) still applies, except that the variable overhead cost as per (a) is now considered to be fixed for the short/intermediate term, based on the value (\$) which applied to the product mix in (a). Required: (i) Calculate the mix (units) of products R and S which will maximise net profit and the value of that net profit. (ii) Calculate the throughput accounting ratio for product S which is calculated as: throughput return per hour of bottleneck resource for product S/overall total overhead cost per hour of bottleneck resource. 141 June 2014 Examinations Paper F5 PRACTICE QUESTIONS
Free ACCA course notes Free ACCA lectures Free tests Free tutor support StudyBuddy Largest ACCA forums 4 Cameron George Cameron, a self employed builder, has been asked to provide a fixed price quotation for some building work required by a customer. Cameron’s accountant has compiled the following figures, together with some notes as a basis for a quotation. \$ Direct materials Bricks 200,000 at \$240 per thousand 48,000 note 1 200,000 at \$288 per thousand 57,600 Other materials 12,000 note 2 Skilled 7,680 hours at \$12 per hour 92,160 note 3 Unskilled 4,800 hours at \$6 per hour 28,800 note 4 Other costs Machine hire 8,400 note 5 Depreciation of own machinery 4,800 note 6 General overheads 12,480 hours at \$1 per hour 12,480 note 7 Plans 4,800 note 8 Total cost 269,040 Profit 67,260 note 9 Suggested price \$336,300 Notes (1) The contract requires 400,000 bricks, 200,000 are already in inventory and 200,000 will have to be bought in. This is a standard type of brick regularly used by Cameron. The 200,000 in inventory were purchased earlier in the year at \$240 per 1,000. The current replacement cost of this type of brick is \$288 per 1,000. If the bricks in inventory are not used on this job George is confident that he will be able to use them later in the year. (2) Other materials will be bought in as required; this figure represents the purchase price. (3) Cameron will need to be on site whilst the building work is performed. He therefore intends to do 1,920 hours of the skilled work himself. The remainder will be hired on an hourly basis. The current cost of skilled workers is \$12 per hour. If George Cameron does not undertake the building work for this customer he can either work as a skilled worker for other builders at a rate of \$12 per hour or spend the 1,920 hours completing urgently needed repairs to his own house. He has recently had a quotation of \$28,000 for labour to repair his home. (4) George employs several unskilled workers on contract guaranteeing them a 40 hours week at \$6 per hour. These unskilled labourers are currently idle and would have sufficient spare time to complete the proposal under consideration. (5) This is the estimated cost of hiring a machine. (6) George estimates that the project will take 20 weeks to complete. This represents 20 weeks’ straight line depreciation on the equipment used. If the equipment is not used on this job it will stand idle for the 20 week period. In either case its value at the end of the 20 week period will be identical.

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