Student Doubts Forum

27.4

27.4

by Chiara De Franco -
Number of replies: 1

Good Morning, 

my result on exercise 27.4 is different from the one in the solution file and I cannot understand why.

Here is how I solved the exercise:

- To compute COGS: TOT VAR COSTS: 1140000/1520000x1500000 + TOT FIXED COSTS: 496000/1600000x1500000 = 1590000

- UROH recovery: 496000 ( 1 - 1520000/1600000) = 24800

- PBT Budget activity: Sales - COGS - UROH recovery - non Manu costs = 645200 (should be 609200)

In reply to Chiara De Franco

Re: 27.4

by Pedro Pinto da Silva Perdigão -
Hello Chiara,

The mistake is on the calculation of the UROH. What you did is correct, but it doesn't account for the whole UROH you should consider. From the 496.000€ of budgeted fixed costs, only 471.200€ were allocated to COGM (496.000€ * 1.520.000€/1.600.000€). Thus, due to that, you already have 24.800€ of UROH, as you correctly pointed out.

However, you cannot forget that the actual manufacturing fixed costs were 532.000€. You will have a total UROH of 60.800€ (532.000 - 471.200) because the MFC you allocated were lower by that amount than the actual MFC the company had in the period.

Hope this helps!

Pedro Perdigão