A manufacturer produces a car component. The cost sheet of the component is as follows: Direct Material 4.00 Direct Labour 2.00 Variable Overheads 1.50 Fixed Overheads 2.50 A foreign manufacturer who uses this car component offers to purchase 20,000 units at Rs. 13 per component against the usual price of Rs. 15 per unit. If this offer is accepted the fixed expenses will go up by Rs. 40,000 annually. Can this offer accepted? Are there any other considerations, which may affect decision?
A manufacturer produces a car component. The cost sheet of the component is as follows: Direct Material 4.00 Direct Labour 2.00 Variable Overheads 1.50 Fixed Overheads 2.50 A foreign manufacturer who uses this car component offers to purchase 20,000 units at Rs. 13 per component against the usual price of Rs. 15 per unit. If this offer is accepted the fixed expenses will go up by Rs. 40,000 annually. Can this offer accepted? Are there any other considerations, which may affect decision?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A manufacturer produces a car component. The cost sheet of the component is as
follows:
Direct Material 4.00
Direct Labour 2.00
Variable
Fixed Overheads 2.50
A foreign manufacturer who uses this car component offers to purchase 20,000 units at Rs. 13
per component against the usual price of Rs. 15 per unit. If this offer is accepted the fixed
expenses will go up by Rs. 40,000 annually.
Can this offer accepted? Are there any other considerations, which may affect decision?
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