Reference no: EM133010602

Question - The company Senior 55AB offers services to homeowners. During the winter, snow removal and winter maintenance are performed. From spring to autumn, they offer garden planning, lawn mowing and gardening. The sales price amounts to SEK 800 per hour.

In the coming year, it is estimated to work and charge customers a total of 12,000 hours, which corresponds to 120% of the normal number of working hours during a year.

Company total costs for the coming year are estimated at SEK 8,000,000. Of these costs, SEK 3,600,000 comprise variable costs and SEK 2,400,000 fixed costs

a) How large will the cost per working hour be according to the division method?

b) How big will the cost per working hour be according to the normal production cost (normal method)?

c) Assume that Senior 55 AB will charge its customers a total of 11000 hours for the coming year. Calculate how much under-coverage or over-coverage in kronor you get for the fixed costs if the cost has been calculated using a normal calculation (the normal method).

d) Explain why over- or under-coverage can occur when you use the normal production cost (normal method).