Below is a pre-calculation for one of EMAB's products "REASONABLE". EMAB uses a mark-up calculation and all costs are stated in kronor per product unit.

Direct material 800
Material costs (variable) 120
Direct salary 2,000
Manufacturing costs (variable) 600
Manufacturing costs (fixed) 1,400
Manufacturing cost 4,920
Affo (fixed) 1 476
Cost 6 396

a) Calculate the percentage of surcharge used for the variable manufacturing costs, if direct material formed the basis of surcharge in the calculation above.

b) Calculate the percentage of surcharge used for the variable manufacturing costs, if direct salary formed the basis of surcharge in the calculation above.

c) Are any of the mark-up bases specified in information a (ie direct material) and b (ie direct salary) better for allocating the variable manufacturing costs than the other? Discuss!

d) A customer has submitted a request to buy 100 pieces of the product "REASONABLE", but is only willing to pay SEK 4,500 per piece excluding VAT. Would you advise the company to accept such a request? Why / why not? Discuss!

e) The direct salary for a “REASONABLE” is based in the preliminary calculation on a time required of 4 hours per product with a salary rate of SEK 500 per hour. In the post-calculation, it turns out that the time required instead amounted to 3.5 hours per product and that the wage rate was SEK 550 per product. Calculate the total wage difference for a “REASONABLE” and how much of this consists of a time difference (quantity difference) and the wage rate difference (price difference).

Answer rating: 100% (QA)

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