Customer Service Chat
Get quote & make Payment
Special order manufacturer, Managerial Accounting
Viti Ltd, located in southern Viti Levu, manufactures a variety of industrial
valves and pipe fittings that are sold to customers in the eastern states.
Currently, the company is operating at about 70 per cent of capacity and is
earning satisfactory return on investment. Management has been approached by
Vanua Industries Ltd of Solomon Islands with an offer to buy 120,000units of
pressure valve. Vanua Industries Ltd manufactures a valve that is almost
identical to the pressure valve produced by Viti; however, a fire in Vanua
Industries’ valve plant has shut down its manufacturing operations. Vanua
needs the 120,000 valves over the next four months to meet commitments to its
regular customers. Vanua is prepared to pay $19 each for the valves. The cost of
the pressure valve produced by Viti, which is based on current attainable
standards, is $20, calculated as follows:
Direct material $5.00
Direct labour 6.00
Manufacturing overhead 9.00
Manufacturing overhead is applied to production at the rate of $18 per standard
direct labour. This overhead rate is made up of the following components:
Variable manufacturing overhead $6.00
Fixed manufacturing overhead (traceable) 8.00
Fixed manufacturing overhead (allocated) 4.00
Applied manufacturing overhead rate $18.00
Additional costs incurred in connection with sales of the pressure valve include
sales commission of 5 per cent of sales, and freight expense of $1 per unit.
However, the company does not pay sales commissions on special orders that
come directly to management. In determining selling prices, Viti adds a 40 per
cent mark-up to total product cost. This provides a $28 suggested selling price
for the pressure valve. The marketing department, however, has set the current
selling price at $27 in order to maintain market share. Production management
believes it can handle the Vanua Industries order without disrupting its
scheduled production. The order would, however, require additional fixed
factory overhead of $12,000 per month in the form of supervision and clerical
costs. If management accepts the order, 30,000 pressure valves will be
manufactured and shipped to Vanua industries each month for the next four
months. Vanua’s management has agreed to pay the shipping charge for the
1. Determine how many direct labour hours would be required each month
to fill the Vanua industries order. (5 marks)
2. Prepare an analysis showing the impact of accepting the Vanua Industries
order (15 marks)
3. Calculate the minimum unit price that management of Viti could accept
for the Vanua Industries order without reducing net profit. (5 marks)
4. Identify the factors, other than price, that Viti Ltd should consider before
accepting the Vanua Industries order.
Posted Date: 10/22/2012 10:24:10 AM | Location : United States
Ask an Expert
Special order manufacturer, Assignment Help, Ask Question on Special order manufacturer, Get Answer, Expert's Help, Special order manufacturer Discussions
Write discussion on Special order manufacturer
Your posts are moderated
Write your message here..
Net operating increase problem , The president expects sales to increase by...
The president expects sales to increase by 12% next year. By how much should net operating income increase? Sales $2,000,000 Variable expenses 1,000
Hold-up problem or another problem, According to the Philadelphia Inquirer,...
According to the Philadelphia Inquirer, in 2004 the city of Philadelphia planned to spend $14 million to convert the Convention Center into an appropriate venue for the Republican
Explain the mark up pricing, Full cost or mark up pricing or cost plus pric...
Full cost or mark up pricing or cost plus pricing method: In this method the marketer estimates the total cost of producing or manufacturing the product and then adds it a mar
Assumptions-relevant costs , Assumptions for relevant costs The key ass...
Assumptions for relevant costs The key assumptions made in relevant costing are: The cost behavior is recognized. The amount of fixed costs, unit variable costs, selli
Explain the organization and control system of a car company, Explain the O...
Explain the Organization and Control System of a Car Company? A car company along with its three product lines. Line A is planned at the luxury segment, Line B at the upscale s
7. Alma and Associates, Alma and Associates, a new consulting service, rece...
Alma and Associates, a new consulting service, recently received a bill for repairs on its computers totaling $2,350. Alma thinks it may have been overcharged and is trying to recr
Analysis, Analysis Various business decisions have recurrent themes: wh...
Analysis Various business decisions have recurrent themes: whether to the outsource production or to the support functions, what level of production and pricing to establish, w
Selective inventory contrrol , cases with solution..
cases with solution..
POHR, #questioExercise 3-12 Computing Predetermined Overhead Rates and Job ...
#questioExercise 3-12 Computing Predetermined Overhead Rates and Job Costs [LO1, LO2, LO3, LO7] Kody Corporation uses a job-order costing system with a plantwide overhead rate base
How would you characterize the politics of food, Given the persistent probl...
Given the persistent problem with starvation in some parts of the world, and the anticipated population growth in developing nations, do we need genetically modified foods? Is it r
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.