Question
In: Accounting
The following data apply to the provision of psychological testing services: Sales price per unit (1...
The following data apply to the provision of psychological testing services:
| Sales price per unit (1 unit = 1 test plus feedback to client) | $ | 320 | |
| Fixed costs (per month): | |||
| Selling and administration | 16,000 | ||
| Production overhead (e.g., rent of testing facilities) | 20,000 | ||
| Variable costs (per test): | |||
| Labor for oversight and feedback | 160 | ||
| Outsourced test analysis | 19 | ||
| Materials used in testing | 6 | ||
| Production overhead | 15 | ||
| Selling and administration (e.g., scheduling and billing) | 16 | ||
| Number of tests per month | 2,000 | tests | |
Required:
Calculate the amount for each of the following (one unit = one test) if the number of tests is 2,000 per month. Also calculate if the number of tests decreases to 1,250 per month
|
Solutions
Expert Solution
Answer - All the cost are dully calcullated below. Refer working notes for details.
| S.no | 2000 tests | 1250 tests | |
| a | Variable Production Cost Per Unit | 200.00 | 200.00 |
| b | Variable Cost Per Unit | 216.00 | 216.00 |
| c | Full Cost Per Unit | 234.00 | 244.80 |
| d | Full Absorption Cost Per Unit | 210.00 | 216.00 |
| e | Prime Cost Per Unit | 185.00 | 185.00 |
| f | Conversion Cost Per Unit | 204.00 | 210.00 |
| g | Contribution Margin Per Unit | 104.00 | 104.00 |
| h | Gross Margin Per Unit | 110.00 | 104.00 |
Working Notes -
| S.no | Formula | 2000 tests | 1250 tests | |
| a | Variable Production Cost Per Unit | Labor for oversighnt & feedback +Outsourced Test +Materials Used +Production overhead | =160+19+6+15 | =160+19+6+15 |
| b | Variable Cost Per Unit | Variable Production Cost + Selling And Administration | =200+16 | =200+16 |
| c | Full Cost Per Unit | Variable Cost + Fixed Cost | =216+18 | =216+28.8 |
| d | Full Absorption Cost Per Unit | Variable Production Cost Per Unit + Production Overhead / Number Of Tests | =200+10 | =200+16 |
| e | Prime Cost Per Unit | Material + Labour + Outsourced Testing | =6+160+19 | =6+160+19 |
| f | Conversion Cost Per Unit | Labor + Outsource Test+ Variable Production Overhead+ Fixed Production Overhead /Number Tests | =160+19+15+10 | =160+19+15+16 |
| g | Contribution Margin Per Unit | Sale Price - Variable Cost Per Unit | =320-216 | =320-216 |
| h | Gross Margin Per Unit | Sale Price - Absorption Cost | =320-210 | =320-216 |
Calculation of Fixed Cost per unit (for 2000 units) = (16000 + 20000)/2000 = $ 18.00.
Calculation of Fixed Cost per unit (for 1250 units) = (16000 + 20000)/1250 = $ 28.80.
Calculation of Production Overhead per unit (for 2000 units) =20,000/2000 = $ 10.00.
Calculation of Production Overhead per unit (for 1250 units) =20,000/1250 = $ 16.00.
ekkarill92 answered 2 years agoRelated Solutions
The following data apply to the provision of psychological testing services: Sales price per unit (1...
The following data apply to the provision of psychological
testing services:
Sales price per unit (1 unit = 1 test plus feedback to
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Fixed costs (per month):
Selling and administration
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Production overhead (e.g., rent of testing facilities)
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Production overhead
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The following data apply to the provision of psychological testing services: Sales price per unit (1...
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test plus feedback to client)
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Production overhead (e.g., rent
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Outsourced test analysis
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Production overhead
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The following data apply to the provision of psychological testing services: Sales price per unit (1...
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services:
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per unit (1 unit = 1 test plus feedback to client)
$
340
Fixed costs
(per month):
Selling and
administration
16,000
Production
overhead (e.g., rent of testing facilities)
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Variable costs
(per test):
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oversight and feedback
145
Outsourced
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Materials used
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Production
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Selling and
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Production overhead (e.g., rent of testing facilities)
17,500
Variable costs (per test):
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Outsourced test analysis 17
Materials used in testing 7
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Selling and administration (e.g., scheduling and billing) 14
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