Page 309 - BA2 Integrated Workbook STUDENT 2018

Answers to supplementary objective test questions

13.2 B
Fixed costs + $40,000
Sales revenue for $40,000 profit = ———–––—————
C/S ratio

380,000
= ————
0.31

= $1,225,806
C/S ratio = 40/129 = 0.31

13.3 C

The contract requires 600kg of material. The 400kg which are in inventory are in
constant use and will therefore have to be replaced at the current purchase
price. The other 200kg will have to be purchased, also at the current purchase
price.

Therefore the relevant cost of the material is 600kg × $27 = $16,200

13.4 D

When determining the production plan that will maximise the company's profit
next period, the company's products should be ranked according to their
contribution per unit of limiting factor.

Firstly we have to determine the limiting factor.

Labour hours required = (500 × 2.5) + (1,200 × 4) + (800 × 3) = 8,450 hours

Kg of material X required = (500 × 3.5) + (1,200 × 1.5) + (800 × 2) = 5,150 kg

There are 9,000 labour hours available therefore this is not limiting. There are
only 5,000 kg of material X available therefore material X is the limiting factor.

CHAPTER 14 – LONG-TERM DECISION MAKING

14.1 The payback period is 3 years 4 months.

$500,000/$150,000 = 3 years + (0.33 × 12) months

= 3 years 4 months.

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