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The above company has a reputation for supplying expensive looking invitation cards for special occasions.  It has been asked to quote for wedding invitations and has estimated the cost of printing 100 invitation cards as follows:

Preparation work                    4 hours @ £30 per hour

Design work                            £120

Paper/Card                              £80

Printing                                   £30

Direct Labour                          2 hour @£23 per hour

Preparation work costs, design work costs and fixed overheads will remain the same irrespective of how many invitation cards are printed.All other costs will vary in proportion to the number of invitations printed. Profit mark-up is 50% of total costs.

As being the firm’s accountant you are required to:

1. Using a spreadsheet prepare an operating statement for output levels of 100, 300, 550, 1000 and 1250 invitation cards which will show the following:
1. Total costs
2. Total profit
3. Selling price per 100 invitations
1. Assume there are three partners in the business called A B and C, calculate the profit for each partner in the ratio of 50:30:20
2. Prepare a chart to show the profit at each output level
3. Comment on the effect of increase in paper costs to £90 per 100 invitations
4. Comment on the effect of 25% increase in all fixed costs.
 Statement Showing calculation of operating cost, Profit and selling price Number of cards Particulars Hours Rate per Invitation 100 300 550 1000 1250 100 Cost preparation work 4 30 £     120.00 £            120.00 £   120.00 £          120.00 £       120.00 Design Work 120 £     120.00 £            120.00 £   120.00 £          120.00 £       120.00 Paper Card 80 £       80.00 £            240.00 £   440.00 £          800.00 £    1,000.00 Printing 30 £       30.00 £              30.00 £     30.00 £            30.00 £         30.00 Direct Labor 2 23 £       46.00 £            138.00 £   253.00 £          460.00 £       575.00 Fixed overheads 150 £     150.00 £            150.00 £   150.00 £          150.00 £       150.00 Total cost £     546.00 £            798.00 £1,113.00 £       1,680.00 £    1,995.00 Profit 50% £     273.00 £            399.00 £   556.50 £          840.00 £       997.50 Total sales £     819.00 £         1,197.00 £1,669.50 £       2,520.00 £    2,992.50 Selling price per 100 £     819.00 £            399.00 £   303.55 £          252.00 £       239.40
 Statement Showing calculation of Profit for each partner Partners A B C Profit Sharing Ratio 50% 30% 20% No. of Cards Profit Share of Each Partner 100 £    273.00 £     136.50 £          81.90 £   54.60 300 £    399.00 £     199.50 £        119.70 £   79.80 550 £    556.50 £     278.25 £        166.95 £ 111.30 1000 £    840.00 £     420.00 £        252.00 £ 168.00 1250 £    997.50 £     498.75 £        299.25 £ 199.50

The increase in paper cost will result in increase in selling price. However, if the old selling price is maintained then it becomes unprofitable. The calculations are shown below:

 Statement Showing calculation of operating cost, Profit and selling price Number of cards Particulars Hours Rate per Invitation 100 300 550 1000 1250 100 Cost preparation work 4 30 £     120.00 £            120.00 £    120.00 £          120.00 £       120.00 Design Work 120 £     120.00 £            120.00 £    120.00 £          120.00 £       120.00 Paper Card 90 £       90.00 £            270.00 £    495.00 £          900.00 £    1,125.00 Printing 30 £       30.00 £              30.00 £      30.00 £            30.00 £         30.00 Direct Labour 2 23 £       46.00 £            138.00 £    253.00 £          460.00 £       575.00 Fixed overheads 150 £     150.00 £            150.00 £    150.00 £          150.00 £       150.00 Total cost £     556.00 £            828.00 £ 1,168.00 £       1,780.00 £    2,120.00 Profit 50% £     278.00 £            414.00 £    584.00 £          890.00 £    1,060.00 Total sales £     834.00 £         1,242.00 £ 1,752.00 £       2,670.00 £    3,180.00 Selling price per 100 £     834.00 £            414.00 £    318.55 £          267.00 £       254.40 Existing selling Price £     819.00 £            399.00 £    303.55 £          252.00 £       239.40 Profit based on old selling price £     263.00 -£            429.00 -£    864.45 -£       1,528.00 -£   1,880.60

The increase in fixed costs results in increase in selling price. If the selling price is not revised then it becomes unprofitable.

 Statement showing Calculation of Profit on change in fixed cost Number of cards Printed Particulars Old Rate Percentage Increase Hours Rate per 100 300 550 1000 1250 100 Cost Preparation work 30 25% 4 £   37.50 £         150.00 £          150.00 £                 - £                    - £                       - Design Work 120 25% £ 150.00 £           37.50 £            37.50 £            37.50 £              37.50 £                  37.50 Paper Card 80 £   80.00 £           80.00 £          240.00 £          440.00 £            800.00 £             1,000.00 Printing 30 £   30.00 £           30.00 £            80.00 £            80.00 £              80.00 £                  80.00 Direct Labour 23 2 £   23.00 £           46.00 £          138.00 £          253.00 £            460.00 £                575.00 Fixed overheads 150 25% £ 187.50 £         187.50 £            23.00 £            23.00 £              23.00 £                  23.00 Total cost £         531.00 £          668.50 £          833.50 £         1,400.50 £             1,715.50 Profit 50% £         265.50 £          669.00 £          834.00 £         1,401.00 £             1,716.00 Total sales £         796.50 £       1,337.50 £       1,667.50 £         2,801.50 £             3,431.50 Selling price per 100 £         796.50 £          445.83 £          303.18 £            280.15 £                274.52 Existing selling Price £         819.00 £          399.00 £          303.55 £            252.00 £                239.40 Profit based on old selling price £         288.00 -£          269.50 -£          529.95 -£         1,148.50 -£             1,476.10

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My Assignment Help. Cost Estimation For Printing Wedding Invitations Essay. (70 Characters) [Internet]. My Assignment Help. 2021 [cited 09 September 2024]. Available from: https://myassignmenthelp.com/free-samples/ac4003-computer-skills-for-accounts/accounting-costs.html.

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