Answer to Question #304821 in Financial Math for James

Question

: a) Outline the various ways of dealing with uncertainity in cost volume profit analysis (4mks)

b) Vast company limited manufactures a single product Zoe.

The following standard cost apply in its business

Standard weight to produce one unit 12kgs

Standard price per kg sh 9

Standard hours to produce one unit 10

Standard rate per hour sh 4

Actual production and costs for one accounting period were as follows:

Material used 3770kgs

Material costs sh 35,815

Hours actually worked 2,755

Hours paid for 2,900

Wages paid sh 11,571

The actual output was 290 units

Required:

Calculate the relevant material and labour variances (6mks)

Answer 1

a) In order to determine the costs and profits in conditions of uncertainty, it is first necessary to determine the "critical points" by methods:

(Boston Consulting Group Matrix, McKinsey Matrix, Shell/DPM Matrix); SWOT analysis method; method of compiling a profile of the environment; logistic analysis.

Taking into account the above methods, try to predict the costs and profits of the enterprise.

b)

deviations amounted to materials