MS6010 M3 OAES Questions

Assigned questions for Module 3 are:

Q10-1: Compare fixed, variable, and mixed costs. Q10-2: What do we mean by a Relevant Range? Q10-3: A professional services business has fixed costs of €150,000 and variable costs of €15 per hour. How much does average cost change between 12,000 or 15,000 units? Q10-4: Use the following information to determine the breakeven in units, breakeven in £, the number of units to get close to the Target Profit, and the amount of £ estimated from the unit sensitivity analysis:

Fixed costs= £240,000 Selling price per unit= £18.00 Variable costs per unit= £12.60 Target profit= £120,000

Q10-5: Looking at Q10-4above, if expected sales are 50,000 units what is the margin of safety? Q10-6: BCD Inc sells its products for $12 each. The company’s volume has remained unchanged for some time at 10,000 units per month although it has spare capacity. Production costs are $10 per unit including fixed costs which average $3 per unit for the production volume. A customer has requested a special order of 2,000 of BCD’s products at a special price of $9. What should BCD do? Please show your work. Q11-1: Define standard cost. Q11-2: Compare job costing with process costing. Q11-3: Little Known Tax, Ltd prepares tax returns for clients. The firm employs six bookkeepers who cost the firm £10,000 in total each week. Each bookkeeper is expected to charge 30 hours per week to client jobs. At the end of the week the total hours charged by the six bookkeepers to client jobs is 150. How much is spare capacity? Q11-4: Last Group has a rental cost of €25,000 per month with a four-year lease term. Casual staff are employed on a weekly basis to carry out telephone sales. The cost of casual staff is €12,000 per month and telephone call costs are €5,000 per month. An offshore call centre has offered to carry out the telephone sales activity from its own premises and using its own staff and telephone services for a fixed payment of €15,000 per month. Should Last Group accept or reject the outsourcing proposal from the call centre? Please show all calculations. Q12-1: An accounting consultant is paid a salary of £80,000 per annum and his employer pays up to of 18% of base salary for medical, life, and dental insurance. His employer also contributes toward a retirement plan at a maximum of 8% of base salary. Assuming the consultants works 250 days per year and is productive for 81% of that time, what is his daily cost rate?Q12-2: Upper Central Consultancy (UCC) wishes to bid for a market research project. The cost estimates on which UCC will base its bid are shown below:

275 hours work in initial data collection and preparation of research questionnaire. The hours are broken down as follows:

·         135 hours are available from existing staff that are not currently utilized. Their total employment cost is £22 per hour.

·         140 hours will have to be bought in from a Temporary Staff Agency for a cost of £16 per hour.

UCC’s in-house existing library resources will be utilized to provide data for the project. The research data that will be used was purchased some months previously at a cost of £2,050. The data has never been used before and is unlikely to be used again. An additional updated report will however have to be purchased at a cost of £500. Printing and postage of questionnaires will incur a cost of £1,100. The in-house computer processing facility will process returned questionnaires. The computer facility makes an internal charge of £2,000 for each survey it processes. The consultancy will have to purchase a specialist software package to undertake the sophisticated statistical analysis required at a cost of £1,750 and incur training costs of £600 to learn how to use the package. The package may be used again in the future. A manager will be involved in the detailed planning, design and logistics for the research. The management time has been costed at 14 days @ £550 but he is very busy and will have to be remunerated through overtime at an additional cost of £3,500 in order for him to carry out other work that he is committed to complete. A partner will supervise the whole project. An estimate of her time has been costed at £1,600 although the consultancy will not incur any additional costs for the project. Using all of the above information, calculate the cost for the market research project based on absorption costing principles. Please detail all of your work.

Q12-3: Using the information from Q12-2 above, what are the relevant costs of the market research project?