(a) Explain the difference between the terms ‘variable costs’ and ‘fixed costs’. Provide examples for each type of costs. (4 marks)

(b) Prepare the product cost sheet for each product to determine the selling price per unit. (9 marks)

(c) Suppose that due to intense competition, the selling price of the cameras have to be fixed as follows:

 

(i) Advise Shoot Co on the feasibility of its product lines given the price constraints. Provide your justification. (3 marks)

(ii) Compute the revised profit based on your recommendation in Part (c)(i) if the budgeted sales quantity of the remaining product lines remain unchanged. (4 marks)

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Question 7 The following cost data is available for Shoot Co which manufactures three types of cameras: Budgeted quantity Direct materials per unit Direct labour per unit Basic 540 units $143.00 $95.00 $46.00 $24.00 $14.00 Advance 420 units $235.00 $143.00 $46.00 $24.00 $14.00 Pro 480 units $328.00 $195.00 $46.00 $24.00 $14.00 Factory overheads costs per unit Selling overheads per unit Admin overheads per unit Shoot Co uses a total cost method of pricing by applying a markup of 20% on total cost. Question 7 The following cost data is available for Shoot Co which manufactures three types of cameras: Budgeted quantity Direct materials per unit Direct labour per unit Basic 540 units $143.00 $95.00 $46.00 $24.00 $14.00 Advance 420 units $235.00 $143.00 $46.00 $24.00 $14.00 Pro 480 units $328.00 $195.00 $46.00 $24.00 $14.00 Factory overheads costs per unit Selling overheads per unit Admin overheads per unit Shoot Co uses a total cost method of pricing by applying a markup of 20% on total cost.

Answer rating: 100% (QA)

a Variable costs are costs that vary with production volume such as the cost of direct materials and ... View the full answer