QUESTIONS 391
9.3 Goldfish Enterprises’ costs for selling 15,000 hours of consultancy services are
£345,000 and costs for 7,000 hours are £185,000. The company wishes to estimate
its fixed and variable costs.
žWhat are the fixed and variable costs for Goldfish?
žWhat is the principal assumption behind your calculation?
9.4 Midlands Refrigeration estimates the costs per unit of a product as:
Direct materials 40 kg @ £2.50 per kg
Direct labour 7 hours machining @ £12 per hour
4 hours finishing @ £7 per hour
Variable production overhead @ £5 per direct labour hour
Fixed production overhead of £1,000,000 based on a production volume of
12,500 units.Calculate the:
žvariable production cost;
žtotal production cost.
9.5 Harrison Products’ capacity is 20,000 units a year. A summary of operating
results for last year is:
Sales (12,000 units @ £100) £1,200,000
Variable costs 588,000Contribution margin 612,000
Fixed costs 245,000Net operating income £ 367,000A foreign distributor has offered to buy a guaranteed 8,000 units at £95 per unit
next year. Harrison expects its regular sales next year to be 15,000 units.
If Harrison accepts this offer and forgoes some of its expected sales to ensure
that it does not exceed capacity, what would be the total operating profit next year
assuming that total fixed costs increase by £100,000?
9.6 Global Conglomerates has a new product that requires 150 kg of material
Y876, which is in constant use within the firm. There are 100 kg in stock that cost
£11.00/kg. The replacement value is £12.50/kg and the scrap value is £2.00/kg.
Calculate the relevant cost of the material to be used in the new product.
9.7 Magnificent Products makes three products, each requiring two machine
hours per unit to produce. The following information has been provided by the
Sales Dept in relation to each product:
Macro Mezzo Micro
Budgeted sales units 10,000 7,500 5,000
Selling price per unit £12 £16 £18
Variable costs per unit £6 £7 £4