An electrical repair service company has produced the following budget for the y House repairs Total £ Received from customers Variable costs Fixed costs (apportioned) Profit (loss) Office repairs £ 45,000 (24,000) (7,000) 14,000 24,000 (18,000) (8,000) (2,000) 69,000 (42,000) (15,000) 12,000 The fixed costs, which relate to rent and insurance, will be incurred irrespective activity carried out. Which of the following decisions is supported by the informa table? A) If the company ceases to carry out house repairs, it will increase total pro 11.000

An electrical repair service company has produced the following budget for the y House repairs Total £ Received from customers Variable costs Fixed costs (apportioned) Profit (loss) Office repairs £ 45,000 (24,000) (7,000) 14,000 24,000 (18,000) (8,000) (2,000) 69,000 (42,000) (15,000) 12,000 The fixed costs, which relate to rent and insurance, will be incurred irrespective activity carried out. Which of the following decisions is supported by the informa table? A) If the company ceases to carry out house repairs, it will increase total pro 11.000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

An electrical repair service company has produced the following budget for the year ahead:
Office repairs House repairs
Total
£
£
Received from customers
Variable costs
Fixed costs (apportioned)
Profit (loss)
45,000
(24,000)
(7,000)
14,000
24,000
(18,000)
(8,000)
(2,000)
69,000
(42,000)
(15,000)
12,000
The fixed costs, which relate to rent and insurance, will be incurred irrespective of the type of
activity carried out. Which of the following decisions is supported by the information in the
table?
A) If the company ceases to carry out house repairs, it will increase total profit from 12,000
to 14,000
B) If the company ceases to carry out house repairs, it will increase total profit from 12,000
to 18,000
C) If the company ceases to carry out house repairs, it will reduce total profit from 12,000 to
6,000
D) If the company ceases to carry out house repairs, it will reduce total profit from 12,000 to
4,000

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