User Account

All Pages

Special order : Manufacturer, Managerial Accounting

Assignment Help:
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
$20.00
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
3
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
valve.
Required:
1. Determine how many direct labour hours would be required each month
to fill the Vanua industries order.
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.

Related Discussions:- Special order : Manufacturer

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

Value chain analysis , VALUE CHAIN ANALYSIS Every firm is a collection...

VALUE CHAIN ANALYSIS Every firm is a collection of activities that are executed to design, generate, market, deliver and support its products or services. Value chain analysis

draw a timeline for the assembly department, #queComputing equivalents uni...

#queComputing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes

Treasury management, Treasury management is explained as "the corporate han...

Treasury management is explained as "the corporate handling of all financial matters, the production of external and internal funds for business, the management of cash flows and c

Budget costing, Archie Ltd manufactures a product called Gizmo. It uses th...

Archie Ltd manufactures a product called Gizmo. It uses the following direct inputs: Price Quantity Cost per unit of output Direct materials $4 per gram 10 grams per unit $40 per

Cash discount, Cash discount is given to buyers to bring them to make promp...

Cash discount is given to buyers to bring them to make prompt payment. The credit terms identify the percentage discount and the period throughout which it is obtainable. Liberal c

Time series analysis, what is semi average trend analysis using regression ...

what is semi average trend analysis using regression analysis method?

What is cost unit, What is Cost unit While the cost centres assists in ...

What is Cost unit While the cost centres assists in ascertaining costs by location, person, equipment, operation or process, cost unit is a unit of product, service or a combin

prepare an income statement, Adm2341 manufactures and sells four different...

Adm2341 manufactures and sells four different products. The following data are extracted from the most recent financial statements:   Products

Decision making, Trinco Ltd (Trinidad & Tobago-T&T) has been negotiating a ...

Trinco Ltd (Trinidad & Tobago-T&T) has been negotiating a contract with a potential customer in Jamaica. Before the negotiations started the Jamaican company agreed to pay $10,000

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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