Calculate the net increase or decrease in monthly profit, Managerial Accounting

Assignment Help:

Painter Ltd, which manufactures and sells a single product, is currently producing and selling 102,000 units per month, which represents 85% of its full capacity. Total monthly costs are Rs619,000 but at full  capacity these would be Rs700,000. Total fixed costs would remain unchanged at all activity levels up to full capacity. The normal selling price of the product results in a contribution to sales ratio of 40%. A new customer has offered to take a monthly delivery of 15,000 units at a price per unit 20% below the normal selling price. If  this new business is accepted, existing sales are expected to fall by one unit for every six units sold to this new customer.

Required:

(a) For the current production and sales level, calculate:

(i) the variable cost per unit;
(ii) the total monthly fixed costs;
(iii) the selling price per unit;
(iv) the contribution per unit.

(b) Calculate the net increase or decrease in monthly profit which would result from acceptance of the new business.
(c) In the context of decision making, explain the term 'opportunity cost' and illustrate your answer by reference to Painter Ltd.


Related Discussions:- Calculate the net increase or decrease in monthly profit

Operating Decisions, 11.1 Process Solutions provides a computer-based docu...

11.1 Process Solutions provides a computer-based document processing service. The accountant has produced the following analysis. Standard Modified Advanced Sales quantity 1,000

The securities and exchange commission (sec), Explain:- Q.1 As a potent...

Explain:- Q.1 As a potential investor, what is the problem with different countries having different accounting standards? As the president of a multinational company, what is

Z or t statistics, Z or t Statistics If n ≥30 we use Z, if, n Ho:  B ...

Z or t Statistics If n ≥30 we use Z, if, n Ho:  B = O that is, there is no relationship between X and Y HA:  B≠ O There is a significant relationship between X and Y The l

Cash forecasting and budgeting, A cash budget is one of the main important ...

A cash budget is one of the main important devices to plan and control cash payments and receipts. In preparation of a cash budget the subsequent points are considered. Cred

Explain management accounting, Explain Management accounting Meaning &...

Explain Management accounting Meaning & definition: Management accounting is comprises of two words, Management and accounting. It is the study of managerial aspect of the ac

Determine the profitability ratios in relation to investment, Determine the...

Determine the Profitability ratios in relation to investment a) Return on capital employed/ return on investment b) Return on equity or return on equity share holders' funds

Features of a queue, Features of a queue A calling population – ref...

Features of a queue A calling population – refers to the number of potential customers. This number may be considered finite or infinite. An infinite calling population is

Introduction to Management Accounting, What is Costco''s Financial decision...

What is Costco''s Financial decisions, Centralized or decentralized?

Financial management, using the operating cycle and any financial managemen...

using the operating cycle and any financial management knowledge discuss the applicability of such cycle to poultry business in Uganda (consider broilers)

Depriciation, In 2007, the controller of the XYZ Company discovered that 20...

In 2007, the controller of the XYZ Company discovered that 2006 depreciation expense was overstated by $50,000, a material amount. Assuming an income tax rate of 40 percent, the pr

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd