Accounting for Managers: Interpreting accounting information for decision-making

SOLUTIONS TO QUESTIONS 419

Table A2.8

Sales 850,000

Less cost of production

Materials 450,000

Labour 175,000

Variable manufacturing expense 30,000

Cost of production 655,000

Opening stock 120,000

775,000

−Closing stock 95,000

Cost of sales 680,000

Contribution margin 170,000

−Fixed manufacturing expenses 65,000

−Selling and administrative expenses 40,000

Operating profit 65,000

Solutions for Chapter 10

10.1
Salary 40,000
National Insurance 11% 4,400
Pension 6% 2,400

Total employment cost 46,800

Working weeks per person

52 − 4 − 2 = 46

Cost per week 46,800/46 £1, 017

Chargeable hours per week 25

Hourly rate (£1,017/25) £40.68 or £41 to the nearest hour

10.2
Volume Cost
1,200,000 £850, 000
1,000,000 £750, 000

Increase 200,000 £100, 000

Variable cost=£100, 000 / 200 , 000 =£0. 50

1,200,000 @. 50 =£600,000. Therefore fixed costs are £250,000 (£850, 000 −£600,000)