Collins Technical College teaches its accountancy subjects wholly through correspondence. This is done by the development and production of self-study packs which enables students to prepare for professional qualifications. Each course of study was sold at the price of £40.00 last year and a total of 28,000 were produced and sold. The production costs of the various courses offered by the college are the same. The variable cost of producing a study course last year was: £ 14.00 16.00 1.25 1.00 Direct Materials Direct Labour Other direct costs (mainly postage) Variable overheads The fixed overhead for the college during the year was £60,000. During the coming year the costs of the organisation are expected to increase by the following: % Direct Materials Direct labour Other Directs Variable Overheads Fixed Overheads 20.00 18.00 67.00 32.00 6.00 Market research has shown that when the company increases the price of its courses to its students, as long as the increase is kept below 17.5% this is unlikely to have an effect on the number of courses sold. However, for every 1% prices are raised above a 17.5% increase, the number of units sold can be expected to fall by 2%. Required: (a) Calculate the selling price of the study courses if the number of study courses sold and the annual profits are to remain as before.
Collins Technical College teaches its accountancy subjects wholly through correspondence. This is done by the development and production of self-study packs which enables students to prepare for professional qualifications. Each course of study was sold at the price of £40.00 last year and a total of 28,000 were produced and sold. The production costs of the various courses offered by the college are the same. The variable cost of producing a study course last year was: £ 14.00 16.00 1.25 1.00 Direct Materials Direct Labour Other direct costs (mainly postage) Variable overheads The fixed overhead for the college during the year was £60,000. During the coming year the costs of the organisation are expected to increase by the following: % Direct Materials Direct labour Other Directs Variable Overheads Fixed Overheads 20.00 18.00 67.00 32.00 6.00 Market research has shown that when the company increases the price of its courses to its students, as long as the increase is kept below 17.5% this is unlikely to have an effect on the number of courses sold. However, for every 1% prices are raised above a 17.5% increase, the number of units sold can be expected to fall by 2%. Required: (a) Calculate the selling price of the study courses if the number of study courses sold and the annual profits are to remain as before.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 1
Collins Technical College teaches its accountancy subjects wholly through correspondence.
This is done by the development and production of self-study packs which enables students
to prepare for professional qualifications.
Each course of study was sold at the price of £40.00 last year and a total of 28,000 were
produced and sold. The production costs of the various courses offered by the college are
the same.
The variable cost of producing a study course last year was:
£
14.00
16.00
1.25
1.00
Direct Materials
Direct Labour
Other direct costs (mainly postage)
Variable overheads
The fixed overhead for the college during the year was £60,000.
During the coming year the costs of the organisation are expected to increase by the following:
%
(b)
Direct Materials
Direct labour
Other Directs
Variable Overheads
Fixed Overheads
Market research has shown that when the company increases the price of its courses to its
students, as long as the increase is kept below 17.5% this is unlikely to have an effect on the
number of courses sold. However, for every 1% prices are raised above a 17.5% increase,
the number of units sold can be expected to fall by 2%.
Required:
(a)
(c)
20.00
18.00
67.00
32.00
6.00
Calculate the selling price of the study courses if the number of study courses sold
and the annual profits are to remain as before.
Calculate the number of units that the organisation would have to sell if it did not
change the price charged but maintained the profit level attained in the previous year.
Give an analysis of a situation where, when prices are changed the number of units
sold is affected. The data provided in the above must be used to illustrate your
answer.
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