Question 36
An investment centre manager is considering the purchase of a new machine. If purchased, the new machine would replace an existing one that is used to manufacture one of the investment centre's existing products.
The new machine would incur $800 per month additional running costs; this includes $300 per month of additional depreciation.
The new machine would save on direct labor time. This means that the fixed production overhead absorbed by the product on the basis of direct labor hours would reduce by $100 per month.
What is the total cost of the above that is relevant to the decision to purchase the machine?
Question 37
Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?
Question 38
A cost centre manager's performance is monitored based on a comparison of actual and budgeted cost.
A summary performance report for the latest period is shown below.
The actual costs include:
*$28,000 for allocated head office costs.
*$18,000 payment for a rental agreement entered into by the cost centre manager two years ago.
*$34,000 for depreciation.
What is the cost centre manager's controllable actual cost for the period?
Give your answer to the nearest $000.
Question 39
S is considering launching a new product.
The variable costs of manufacturing the product will be $6 per unit.
The product must be manufactured in batches of 2,000 units. The machine set up cost for each batch will be $4,000.
Maximum capacity will be 8,000 units each year.
Market research has shown that the unit selling price will affect the demand for the product as follows.
Which unit selling price will maximise annual profit?
Question 40
A new product is being manufactured for the first time. The first unit required 600 minutes of labor to manufacture. It is expected that there will be a 90% learning curve for the first 20 units.
The learning index for a 90% learning curve is - 0.152.
Calculate the expected labor time to manufacture the 10th unit.
Your answer should be given to the nearest whole minute.