Page 296 - P1 Integrated Workbook STUDENT 2018

Subject P1: Management Accounting

1.10 The answer is:

Not part of JIT

Standard working patterns for direct labour 

Predictable demand

Minimisation of work-in-progress

Unpredictable supplier lead times 

JIT requires flexible labour and flexible suppliers. Having standard working
patterns is unlikely to provide a flexible working, and unpredictable lead times
for suppliers would make JIT difficult to apply successfully. The other
statements are typical characteristics of a JIT system.

CHAPTERS 4 TO 6 – DECISION MAKING

2.1 C

2.2 B

2.3 The answer is $60,000.

The material is regularly used so the net realisable value ($3) is not relevant. It
is not scarce and therefore the contribution from the alternative use (the
opportunity cost of $2 per kg) is also not relevant.

If it is used in the project it will have to be purchased on the external market at a
cost of $6 per kg and a total cost of $60,000.

2.4 The answer is 25.

The contribution/sales ratio = $80,000/$140,000 = 0.571

The break-even revenue = $100,000/0.571 = $175,000

This is $35,000 above the current budgeted sales and represents a 25%
increase.

2.5 D

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