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The company Polaris AB has the following composition of its revenues and expenses in 2019:

Revenue / piece SEK 125

Variable costs / pieces SEK 55

Fixed costs SEK 4,200,000

Polaris AB is considering purchasing a new machine for production for SEK 2,400,000. The machine

estimated to last for 15 years. Due to the digitalisation of the machine, which causes an increase in productivity, so

this machine is estimated to cause a cost reduction of SEK 150,000 / year due to lower

staffing costs. This is valid for 7 years, which is the economic life. This

investment is also estimated to cause a revenue increase of SEK 350,000 / year. After the economic

the lifespan is estimated to be able to sell the machine for SEK 400,000. The company uses a discount rate

12%.

The company uses a mark-up calculation when calculating manufacturing costs. Now studying

a product named XY734. In the mark-up calculation, they distribute the manufacturing costs (TO)

with direct salary as the base of charges, while the material cost (MO) is distributed with direct material

as a base of orders. Below is a summary of the financial outcome for the year 2020.

a) Explain the differences between expenses and costs related to the company's operations.

b) Calculate, and explain the significance of the critical volume in 2019 for Polaris AB, according to the information above. And calculate the critical turnover the same year for Polaris AB according to the information above. Explain how this information can be used in the company.

In cases where the company compiles grant calculations, they usually use the variable costs as special costs. Discuss two decision situations where this form of standard use of

variable costs such as special costs can be considered problematic based on the grant calculation

perspective (please reason based on the cost summary for 2020 above).

Painting / Assembly Purchase Total Outcome: Costs 2020: the factory (all amounts in 1000SEK) Manufacturing department Manufacturing XY734 Kit Material 800 180 135 Monthly salary 2 600 1 600 800 Depreciation Commanly 20 Commanly 50 900 Commanly 30 400 1 000 1 215 7 300 950 620 800 100 50 Rent 50 Electrical 263 500 200 100 2 620 70 40 357,5 1 517,5 Various 23 171,75 725 Amount 3 400 1 780 957,5 11 305,50 35 000 33 500 Number according to budget/piece 20 000 935 10 000 9 000 5 000 4 500 Number according to outcome piece 20 000 Painting / Assembly Purchase Total Outcome: Costs 2020: the factory (all amounts in 1000SEK) Manufacturing department Manufacturing XY734 Kit Material 800 180 135 Monthly salary 2 600 1 600 800 Depreciation Commanly 20 Commanly 50 900 Commanly 30 400 1 000 1 215 7 300 950 620 800 100 50 Rent 50 Electrical 263 500 200 100 2 620 70 40 357,5 1 517,5 Various 23 171,75 725 Amount 3 400 1 780 957,5 11 305,50 35 000 33 500 Number according to budget/piece 20 000 935 10 000 9 000 5 000 4 500 Number according to outcome piece 20 000

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