Calculate the total costs of the special order

Assignment Help Managerial Accounting

Reference no: EM131217241

Accounting for Managers Assignment-

Question 1 -

Bonza Handtools Ltd. manufactures a popular power drill suitable for the home renovator. Financial and other data for this product for the last twelve months are as follows:

Sales	20000 units
Selling price	$130 per unit
Variable manufacturing cost	$50 per unit
Fixed manufacturing costs	$400000
Variable selling and administrative costs	$30 per unit
Fixed selling and administrative costs	$300000

The directors of Bonza Ltd. want to try to increase the profitability of this product and invited senior staff to suggest how this might be done. Three suggestions have been received.

The accountant, Jan Rossi, believes that a price increase of $10 per unit is the best way to boost profits. She would spend an additional $125000 on national advertising and contends, that if this is done, sales volume would not drop appreciably from last year.
The production manager, Tom Tune, thinks that an improved quality product could increase sales volume by 25% if accompanied by an advertising campaign costing $50000 aimed at trades people as well as home renovators. The improved quality would add $5 per unit to the variable cost. Mr Tune believes that the price should not be increased.
The sales manager, Mary Watson, wants to undertake a promotion campaign where a $10 rebate is offered on all drills sold during the three months beginning 1 April. Normally 6000 units are sold during that period and Ms Watson believes that this could be boosted to 10000 units if an advertising campaign costing $40000 were launched late in March.

You have been asked by the Bonza board to comment on each of these three proposals. Draft a report in response to this request. You are not asked to make an outright choice, but rather to analyse the potential strengths and weaknesses. The sales volumes forecast by each staff member should be treated as estimates only and your report should examine the effects of variations in actual sales from these forecasts.

Give figures to support your comments and mention qualitative factors that may also be involved.

Question 2 -

The Tassie Company estimates that next year it will manufacture and sell 150000 units of its product. On the basis of that level of activity, it has budgeted for the following costs and prices per unit:

Direct Material Cost	$2.50
Direct Labour Cost	3.00
Variable Factory Overhead	1.50
Fixed Factory Overhead	2.00
Manufacturing Cost	9.00
Variable Selling and Administrative Cost	2.00
Fixed Selling and Administrative Cost	1.50
Total Cost	12.50
20% Mark-up	2.50
Selling Price	$15.00

The Company has an opportunity to bid for the supply of an additional 40000 units of its product to a government department. No sales commission (variable selling and admin. cost) is involved and no additional fixed costs will be incurred.

Give a reasoned opinion on the level of the bid that should be made in each of the following two circumstances:

(a) The capacity of the Tassie Company's factory is 200,000 units per year.

(b) The capacity of the factory is only 180,000 units per year.

Question 3 -

Is it possible for costs such as salaries or depreciation to end up as assets on the balance sheet? Explain using examples to support your statements.

Question 4 -

ABC Ltd makes trailers. It receives a special order to produce 350 trailers for a local retail outlet. The order will take 2,100 kg of material that costs $16.10 per kg and will require 1,400 direct labour hours and 525 machine hours. The following are the expected/budgeted annual costs for ABC Ltd:

Direct labour	$327,600
Direct labour hours	25,795
Direct materials	$193,200
Indirect costs	$98,400
Machine hours	9,840

Required:

1. Calculate the overhead allocation rate: note that the process is labour-intensive

2. Calculate the total costs of the special order

3. Calculate the cost of the special order if ABC Ltd uses machine time as the basis for allocating overheads

4. Calculate the minimum price per trailer that ABC Ltd could accept.

5. Explain how segmented overhead cost pools and activity based costing can assist accurate costing for pricing purpose.

Reference no: EM131217241

Questions Cloud

Describe cultural and historical influences on conceptions : Describe the activity for the session. We learn from each other when we listen and reflect on the experiences of others. Create and describe an activity that will promote discussion among your participants.

Propose policies on training and education for earthquake : Finally, the committee will need to propose policies on training and education for earthquake preparedness. Both the organization's employees and the public will need education and training for the earthquake preparedness plan to be truly effectiv..

Discuss the two to three us military interventions : Discuss the two to three US military interventions from the past five years that you researched. List three aspects of US history between 1865 and 1945 that led to the US's rise as a world superpower policeman.

Identify one complementary healing nursing therapy : Identify one complementary or alternative healing nursing therapy, or a non-invasive nursing therapy for a form of cancer.

Calculate the total costs of the special order : ACC00724 Accounting for Managers Assignment. Calculate the overhead allocation rate: note that the process is labour-intensive and Calculate the total costs of the special order

What rate of income tax from all level of government is curr : What rate of income tax from all level of government is currently in place in United States?

What is the change in consumer surplus : The aggregate demand for good X is Q= 20 - P. If the price rises from p = $4 to p= $5, what is the change in consumer surplus.

How many chromosomes will the daughter cells have : In which stage of mitosis are the chromosomes lined up on the cell's equator? If a parent cell has 46 chromosomes prior to mitosis, how many chromosomes will the daughter cells have?

Units of steel are expected in raw materials inventory : Little Red Company manufactures wooden wagons. To manufacture a wagon, it takes 20 units of wood and 1 unit of steel. Scheduled production of wagons for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 8,000 units of..

User Account

All Pages