question archive The following information relates to questions 9 and 10 Lugger Ltd is a small engineering company in which one department manufactures a specialised component for another company
The following information relates to questions 9 and 10 Lugger Ltd is a small engineering company in which one department manufactures a specialised component for another company
Subject:BusinessPrice: Bought3
The following information relates to questions 9 and 10 Lugger Ltd is a small engineering company in which one department manufactures a specialised component for another company. Currently the annual demand for this component is 9,000 units and the price is £20 per unit. The annual budgeted costs for the component are set out below. £ Materials 63,000 Direct labour 18,000 Machine lease 25,000 costs Other fixed costs 45,000 Total costs 151,000 Direct labour represents the full cost of employing the two workers who operate the machine, their wages are not dependent on the level of production. Recently Lugger has discussed the possibility of leasing a different machine This would enable cheaper raw materials to be used, costing only £3 per unit. The new machine would have an annual lease payment of £55,000. 110 Calculate margin of safety for the present machine and optional one, using current demand. Give your answers in terms of units produced Present Optional 3,615 3,117 2,230 3.823 2,230 2.058 D 4,882 A B O + 3,615
