Sheet1

Learning curve

Y=ax^b

Where a=$30,x= 128 and b=-0.074000581

Y=30(128^-0.074000581)
Y= 1.3966746
Total time 20.9501189

Average cost for 128 chairs

Frame and massage mechanisim 51
Leather cost 25
labour cost 20.95
Estimated cost 96.95

Target S.P 120

Margin (20%) 24
Target cost 96

Cost Gap -0.95

Average cost for 128th chair

Y=ax^b
Where a=$30,x= 127 and b=-0.074000581
Y=2(128^-0.074000581)
Y= 1.39748546
Total time 177.480653

Time for 128th chair is 1.29

cost 19.35

Average cost for 128th chairs

Frame and massage mechanisim 51
Leather cost 25
labour cost 19.35
Estimated cost 95.35

Target S.P 120

Margin (20%) 24
Target cost 96

Cost Gap 0.65

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Variance Analysis

Sales price variance

Plasma Tvs
Actual sales price 330 290 Total
Budgeted sales price 350 300
-20 -10
Actual sales volume 750 650
Adverse sales price variance -15000 -6500 -21500

Sales volume variance

Budgeted sales volume 590 590
Actual sales volume 750 650
-160 -60
Standard contribution per unit 190 180
Adverse sales volume variance -30400 -10800 -41200

Material price planning variance

Budgeted price 60
Revised price 85
-25
Actual volume used 1400
Adverse material price planning va -35000

Material price Operational variance

Revised price 85
actual price 80
5
Actual volume used 1400
favourable material price operation 7000

Labour rate variance

Actual hours worked by permanent staff

Plasma tv 1500
Lcd tv 975
2475
Permanent staff provided 2200
Extra hours by temporary staff 275
take times 2 than permanent staff 550

Standard rate 14
Actual rate 18
-4

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actual hours worked 550

Adverse rate variance -2200

Labour efficiency variance

Standard hours 275
Actual Hours 550
-275
14
Adverse labour volume variance -3850

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Relevant cost for the decision

Reference Total amount

Lost revenue Working (1) -96000
loss of contribution Working (1) -118500
Redundancy and Recruitment costsWorking (2) -3700
Saved material costs Working (3) 0
Saved labour costs 48000
Income from lease contract 12000
-158200
The production of Td should not be discountinued, this decision will help co in saving significant costs if produc

Workings
(1) Lost revenue
DW WM TD Total
lost revenue -96000 -96000
loss of revenue (other products) 37500 81000 -118500

(2) Direct labour costs

If TD ceased now:
Redundancy costs -6000
Retraining costs (saved) 3500
Recruitment costs -1200
-3700

(3) Material costs

DW WM TD Net
Current material cost 350000 600000 60000 1010000
TD ceased now -60000 -60000
Loss of sales -17500 -30000 -47500
New discount 902500
Difference in net cost

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saving significant costs if product line of TD is continued

discount Gross value

5% 1063158
5% -63158
5% -50,000 950000
5% 950000

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