Given the total cost and activity levels terms sales units per each month

that students provide a complete and coherent work as one assignment.

- For discussion questions, any materials based on different source (i.e textbook,

- All questions should be answered in full. If you miss any question, it can significantly

impact your overall mark.

300 words is expected for each 5-mark question.

For questions with emphasis on calculations (Q4- Q8): 50%

Q1:
PART 1: PANDA LTD (6 MARKS)
Panda Ltd produces one type of sofa and the details per month are as follows:

PART 2: MARS LTD (6 MARKS)

Mars Ltd provides a single standard service. The business’s results for the past two months are as follows:

There were no changes, of any description, in selling prices or costs over the two

c. Calculate contribution margin ratio per unit and briefly explain what it means for Mars Ltd

d. Calculate margin of safety for each month in units as well as percentage terms and briefly explain what it means for Mars Ltd

achieve the highest profit for the company.

Clearly show your workings which shows the no of units to be produced, total contribution and total profit.

The business has a machine time capacity of 19,000 hours per month.

Total fixed cost per month is £90,000.

Q4:

PART A: (5 MARKS)

Alternatively, it can be used as a substitute for other Component R which is currently used by the business. It will require further processing cost of £ 7 per unit. Component R’s purchase price is £20 per unit.

Component D is very toxic and, if it is not used for this particular job, the whole of the inventories which is 300 units will have to be disposed of safely at a cost of £650 (i.e to be paid for being collected).

of Component KX. This component is not normally used by the business, however, 140

units are currently held as inventories following a cancelled order. These units cost the

2. Fury Limited is an engineering company that owns a non-working machine, which it wants to sell. The machine needs a replacement part before it can be sold. It is possible to buy the part for £860.

This would take 9 hours to fit by one of the company's engineers who is paid £27 an hour. At present the company is very busy and all engineers are fully employed on work for customers, which is charged out at £65 per hour. The company paid £8,000 to buy the machine and without the part it could be sold for an estimated £6,200.

4. Thornbury Ltd holds the following chemicals in inventories:

What is the relevant cost when assessing the viability of the refit contract?

6.Marine Engineers Ltd owns a cruiser yacht that is in need of repair. The cruiser yacht was taken in lieu of payment for an unpaid bill for £4,600. The company is working to full capacity but is considering refurbishing the yacht for resale. Workers who are paid £16 per hour will carry out the refurbishment and it is estimated that 160 hours of work is required. The normal labour charge for customers is £30 per hour. The company believes that the cruiser yacht could be sold for £ 3,900 in its current condition. Materials costing £750 would be required to carry out the refurbishment. These materials are currently in inventories as they are frequently used by the business.

5 kg of Material A

3 kg of Material B

Skilled labour: Each unit requires 4 hours of skilled labour. It is currently paid at a rate of £21 an hour and skilled labour is hired on a permanent basis. 500 hours can be provided by members of staff who currently have no work to do due to a quiet time. Only taking staff off other work can provide the remaining hours needed for this new project. This other work is charged out to customers at £65 an hour and material cost is £15 per hour.

Semi-skilled labour: Each unit requires 7 hours of semi-skilled labour. It is currently paid £11 per hour. If the required semi-skilled labour for this project is provided by the existing members of staff who are busy, the business will have to hire new employees at a rate of £14 per hour.