A company sells beds and can produce 1,000 units per month for a fixed cost of £216,759. The variable cost is £414 per unit and the current demand is700 units which sell for £968 per unit. The company is approached by a hotel for an order of 200 beds at £614 per unit.Answer the following questions:Is the fixed cost relevant when deciding to accept or reject this special order?How much additional contribution will be generated by accepting this order?Per unit (£):In total (£):Should the company accept this special order from the hotel?YesNo

Explanation: Marginal Costing The business has the capacity to produce 1000 units and it's currently…

Answered: A company sells beds and can produce…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Answer the following questions. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.) Make Buy Relevant costs: Unit relevant cost Douglas…
Butcher Butcher is considering whether to invest in a new product, the Zam. Details of the Zam are as follows: £ £ Selling price 22.00 Direct labour 5.00 Material 4.50 Variable overheads 2.50 12.00 Contribution 10.00 The company expects to sell 10,000 each year for 5 years and to incur additional fixed costs of £13,000 pa. It has a cost of capital of 15%. The product would require the purchase of a machine for £300,000, which would be sold at the end of the project for £50,000. Required: Calculate the NPV based on the estimates above. Calculate the sensitivity of the decision to changes in the sales price, the material cost per unit, the sales volume and the disposal value of the machine.
Ashley’s company is looking to add two new printers that will increase fixed costs by $75,000. The variable costs are $50 per order. The two new printers allow the business to increase their orders by 5000 annually. How many orders would have to be added to justify buying these new printers, vs not making any changes and continuing as they are? What other considerations might you consider in whether or not to make this purchase or not?
Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Truckel make or buy the wickets? a. Buy; savings = $15,000 b. Buy; savings = $5,000 c. Make; savings = $10,000 d. Make; savings = $5,000
XYZ Company incurs costs of $ 30 per unit ($18 variable and $12 fixed) to make a product that normally sells for $42. A foreign wholesaler offers to buy 6,000 units at $26 each. The special order results in additional shipping costs of $1 per unit. Calculate the increase or decrease in net income the company realizes by accepting the special order, assuming they have excess operating capacity. Should the Company accept the special order? Select one: a. XYZ should reject the special offer to avoid 42,000 loss. b. XYZ should accept the offer to gain 24,000 net income. c. XYZ should accept the offer to gain 42,000 net income. d. XYZ should reject the special offer to avoid 24,000 loss.
Please help me. Fast solution please. Thankyou.
Radar Company sells bikes for $510 each. The company currently sells 4,200 bikes per year and could make as many as 4,580 bikes per year. The bikes cost $255 each to make: $180 in variable costs per bike and $75 of fixed costs per bike. Radar received an offer from a potential customer who wants to buy 380 bikes for $490 each. Incremental fixed costs to make this order are $46,000. No other costs will change if this order is accepted. Compute Radar's additional income (ignore taxes) if it accepts this order. Incremental Amount per Unit Incremental Incremental Income from New Business Fixed Costs Contribution margin Incremental income (loss) from new business The company should
15
Yara manufactures state-of-the-art chairs. Manufacturing costs are expected to be £120 per chair, consisting of 70% variable costs and 30% fixed costs. The company has surplus capacity available. Yara's policy is to add a 60% profit margin to full costs. Yara is invited to bid on a one-time-only special order to supply 200 chairs. What is the lowest price Yara should bid on this order? a. £24,000 b. £14,400 c. £38,400 d. £16,800
Diversity Ltd. produces and sells a product called Star. The company is currently selling 9,560 units of the product which represent £143,400. Total fixed costs equal £66,920 and total contribution equals £66,920. Required: a) Considering this information, is Diversity Ltd. selling a profitable amount of its product Star and which would be your advice for the company? Which is the price per unit at which Diversity Ltd. is selling its product? Explain your answer in detail. b) Consider that, after an increase in the market demand of product Star, Diversity Ltd. sells 25% more units of product Star. In this new situation, is Diversity Ltd. selling a profitable amount of its product Star? Explain your answer in detail. c) Draw a graph related to your previous answers in a) and b). Consider the information from the graph, which would be the financial situation of Diversity Ltd. if sales decrease in more than 25%?
Required:(a) GEM has an opportunity to sell 10 000 units to an overseas customer. Import duties and other special costs associated with this order would total $42 000. The only selling costs that would be associated with the order would be a shipping cost of $9.00 per unit. What would be the minimum acceptable unit price for GEM to consider this order? (hint: GEM would not accept the order if it would reduce the company’s profit) (b) The company has 200 units of Flicks on hand that were produced two months ago. Due to blemishes on the units, it will be impossible to sell these units at the normal price. If the company wishes to sell them through regular sales channels, what would be the relevant cost for setting the minimum price? Explain. (c) “All future costs are relevant in decision making.” Do you agree? Explain.
It costs Ghala Company OMR 13 of variable and OMR 6 of fixed costs to produce one unit which normally sells for OMR 35. Al Hadid Co. offers to purchase 3,000 units at OMR 15 each. Ghala Co. would incur shipping costs of OMR 1 per unit if the order were accepted. Ghala Co. has sufficient unused capacity to produce the 3,000 units. If the special order is accepted, what will be the effect on net income? Select one: a. OMR 6,000 increase O b. OMR 3,000 increase C. OMR 45,000 increase d. None of the answers are correct e. OMR 9,000 decrease

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS