Accounting for Managers: Interpreting accounting information for decision-making

SOLUTIONS TO QUESTIONS 427

Table A2.18

Widgets Gadgets Helios

Sales volume 50,000 40,000 30,000

Total contribution 650,000 440,000 240,000

Machining @ .85 85,000 170,000 102,000

Assembly @ .60 210,000 72,000 36,000

Set-up @ £50 6,000 10,000 10,000

Order processing @ £4. 875 39,000 39,000 78,000

Purchasing @ £7. 50 22,500 30,000 31,500

Profit/(loss) 287,500 119,000 (17,500)

Table A2.19

A B C Total

No. units 150,000 200,000 350,000

Selling price £50 £35 £25

Variable costs £20 £17 £14

Contribution per unit £30 £18 £11

Sales revenue 7,500,000 7,000,000 8,750,000 23,250,000

Variable costs 3,000,000 3,400,000 4,900,000 11,300,000

Contribution (total) 4,500,000 3,600,000 3,850,000 11,950,000

Fixed expenses 6,900,000

Operating profit 5,050,000

Preferred services

Based on volume of production (Production Dept preference?):

C, B, A

Based on sales revenue (Sales Dept preference?):

C, A, B

Based on contribution per unit of volume:

A, B, C

Based on total contribution (Accounting Dept preference?):

A, C, B