P2 Exam Dumps : Advanced Management Accounting

An investment centre manager is considering the purchase of a new machine. If purchased, the new machine would replace an existing one that is used to manufacture one of the investment centre's existing products.

The new machine would incur $800 per month additional running costs; this includes $300 per month of additional depreciation.

The new machine would save on direct labor time. This means that the fixed production overhead absorbed by the product on the basis of direct labor hours would reduce by $100 per month.

What is the total cost of the above that is relevant to the decision to purchase the machine?

A company has a cost of capital of 12% and a maximum of $20 million to invest. It has identified three possible investment projects, none of which is divisible, as follows.

Which project(s) should the company invest in?

Endure Co. makes 1,000 units ofX and 2,000 units of Y.

Costs for X: Material $4, labour $8, direct overhead $2, fixed cost $4.

Costs for Y: Material $9, labour $9, direct overhead $4, fixed cost $6.

Selling price for X and Y are S19 and $25 respectively. Another company can sell ready made product X and product Y's to Endure Co, this company sells X at $12 and Y at $21. Advise Endure Co. on what would be the

most cost effective way to source products X and Y.