2) Consider the nine activities that follow. ter coding for a new spreadsheet pa

Question

2) Consider the nine activities that follow. ter coding for a new spreadsheet package. 2. A breakfast produces cereal. 3. A major metropolitan hospital: Examining a new patient. cereal company: Painting the office of a maintenance supervisor at a plant that 4. A regional airline carrier: The 90 minutes that a Boeing 757 sits idle on the ground between fligh 5. A retail office supply store: Moving cases of paper from one location to another in the same warehouse 6. A company that makes watches: Attaching a watch band to the watch's face. 7. A shipping company: Reprocessing cargo that had been sorted incorrectly on a malfiunctioning sorting machine. 8. An investment company: Correcting errors made by company personnel in customer accounts 9. A major hotel chain: Upgrading the quality of bedding used at hotels in very competitive marketplaces Required: Categorize each of the activities as either value-added or non-value-added for the companies noted.

Explanation / Answer

Ans. 2

1) Value added- as contributing in the earning of a company

2) Non Value added - Painting the office not increasing the capacity of producing cer

3) Value Added - as contributing in the earning of a company

4) Non Value added- Idle Time not contributing to any value

5) Non Value added - Moving cases is not adding any worth

6) Value added - Addinh a watch band is an activity towards completion of project

7) Non Value added - Rework step is not a value added activity

8) Non Value added - Rework step is not a value added activity

9) Value added - Improving the quality is directly adding value

Ans. 3 Variable cost is the cost that changes with change in output.

   Fixed cost is the cost that do not changes with change in output.

Semi - variable cost is a cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption and become variable after this production level is exceeded. If no production occurs, a fixed cost is still incurred.

A)

1) Variable

2) Variable

3) Fixed

4) Semi-Variable

5) Fixed

B) Formula to compute total production cost

Y = a + bX

where, Y = Total Production cost

a = Fixed Cost

b = Variable Cost per Unit

X = No. of units produced

Ans. 4) A)Break even Pt in units = Fixed cost / Contribution per unit

   Fixed Cost    = 48000 = 8000 Pizzas to be sell

Sale Price - variable cost 9 - 3

B) Target Profit = Contribution - Fixed Cost

54000 = Contributiion - 48000

Contribution = 6000

Contribution per unit = 6

Sales Unit = 6000/6 = 1000 Pizzas to be sell to achieve target profit

C) safety Margin = (Budgeted sales - Breakeven sales) Sale Price

= ( 9900 - 8000 ) 9

= 17100

D) Contribution margin in laymans terms can be referred as per unit profit on a sale of unit, simple as sale price less total variable cost.

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