PDF《Paper F5》

1 Year

2 Sales volumes (units) 280,000 420,000 $ $ Selling price per unit

55 45 Material cost per unit

16 14 Labour cost per unit

8 7 Note: A unit is a pair of shoes Other costs are expected to be as follows: Year

1 Year

2 $m $m Fixed production overheads 1・6 2・2 Selling and distribution costs 0・6 0・9 Environmental costs 0・1 0・15 Shoe Co is still negotiating with marketing companies with regard to its advertising campaign, so is uncertain as to what the total marketing costs will be each year. However, the following information is available as regards the probabilities of the range of costs which are likely to be incurred: Year

1 Year

2 Expected cost Probability Expected cost Probability ($m) ($m) 2・2 0・2 1・8 0・3 2・6 0・5 2・1 0・4 2・9 0・3 2・3 0・3 Required: Applying the principles of life cycle costing, calculate the total expected profit for Shoe Co for the two-year period. (10 marks)

4 4 A manufacturing company, Man Co, has two divisions: Division L and Division M. Both divisions make a single standardised product. Division L makes component L, which is supplied to both Division M and external customers. Division M makes product M using one unit of component L and other materials. It then sells the completed product M to external customers. To date, Division M has always bought component L from Division L. The following information is available: Component L Product M $ $ Selling price

40 96 Direct materials: Component L (40) Other (12) (17) Direct labour (6) (9) Variable overheads (2) (3) Selling and distribution costs (4) (1) CCC CCC Contribution per unit before fixed costs

16 26 CCC CCC Annual fixed costs $500,000 $200,000 Annual external demand (units) 160,000 120,000 Capacity of plant 300,000 130,000 Division L charges the same price for component L to both Division M and external customers. However, it does not incur the selling and distribution costs when transferring internally. Division M has just been approached by a new supplier who has offered to supply it with component L for $37 per unit. Prior to this offer, the cheapest price which Division M could have bought component L for from outside the group was $42 per unit. It is head office policy to let the divisions operate autonomously without interference at all. Required: (a) Calculate the incremental profit/(loss) per component for the group if Division M accepts the new supplier'

s offer and recommend how many components Division L should sell to Division M if group profits are to be maximised. (3 marks) (b) Using the quantities calculated in (a) and the current transfer price, calculate the total annual profits of each division and the group as a whole. (6 marks) (c) Discuss the problems which will arise if the transfer price remains unchanged and advise the divisions on a suitable alternative transfer price for component L. (6 marks) (15 marks)

5 [P.T.O.

5 Glove Co makes high quality, hand-made gloves which it sells for an average of $180 per pair. The standard cost of labour for each pair is $42 and the standard labour time for each pair is three hours. In the last quarter, Glove Co had budgeted production of 12,000 pairs, although actual production was 12,600 pairs in order to meet demand. 37,000 hours were used to complete the work and there was no idle time. The total labour cost for the quarter was $531,930. At the beginning of the last quarter, the design of the gloves was changed slightly. The new design required workers to sew the company'

s logo on to the back of every glove made and the estimated time to do this was