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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

Fixed overheads                      £150

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

Addison, P.S., 2017. The illustrated wavelet transform handbook: introductory theory and applications in science, engineering, medicine and finance. CRC press.

Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate finance (Vol. 324). John Wiley & Sons.

Härdle, W.K., Hautsch, N. and Overbeck, L. eds., 2017. Applied quantitative finance (Vol. 2). Springer.

Minsky, H., 2016. Can" it" happen again?: essays on instability and finance. Routledge.

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My Assignment Help. (2021). Cost Estimation For Printing Wedding Invitations Essay. (70 Characters). Retrieved from https://myassignmenthelp.com/free-samples/ac4003-computer-skills-for-accounts/accounting-costs.html.

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My Assignment Help (2021) Cost Estimation For Printing Wedding Invitations Essay. (70 Characters) [Online]. Available from: https://myassignmenthelp.com/free-samples/ac4003-computer-skills-for-accounts/accounting-costs.html
[Accessed 22 May 2024].

My Assignment Help. 'Cost Estimation For Printing Wedding Invitations Essay. (70 Characters)' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/ac4003-computer-skills-for-accounts/accounting-costs.html> accessed 22 May 2024.

My Assignment Help. Cost Estimation For Printing Wedding Invitations Essay. (70 Characters) [Internet]. My Assignment Help. 2021 [cited 22 May 2024]. Available from: https://myassignmenthelp.com/free-samples/ac4003-computer-skills-for-accounts/accounting-costs.html.

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