Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 6,000 machine- hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make productive use of the excess capacity. JCL Ltd., a potential customer, has offered to buy 10,000 tool boxes at $11.90 per box, provided that the entire quantity is delivered in two months. The current per-box cost data are as follows: Direct materials. Direct labour (½ hour at $10.40/hour) Total manufacturing overhead Total unit product cost $ 3.60 5.20 3.10 $11.90 Both fixed and variable overhead are allocated using direct labour-hours as a base. Variable overhead is $2.60 per direct labour-hour. Without the order, Anchor would have enough business to operate at 4,800 direct labour-hours in each of the next two months. The regular selling price of the tool boxes is $14.90. A sales commission of 50 cents per unit is paid to sales representatives on all regular sales. No additional selling or administrative expenses are anticipated on account of accepting this special order and no commissions will be paid on this special order. The production manager is concerned about the labour time that 10,000 boxes would require. She cannot schedule overtime because Anchor has a policy against it. JCL will not accept fewer than 10,000 tool boxes. Therefore, in order to fill the special order, it would be necessary for Anchor Company to divert some of its regular sales to the special order. Required: 1-a. Prepare contribution margin income statements for the two-month period both with and without the special order. (Leave no cells blank - be certain to enter "0" wherever required.) ANCHOR COMPANY Contribution Margin Income Statement Without Special With Special Order Order
Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 6,000 machine- hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make productive use of the excess capacity. JCL Ltd., a potential customer, has offered to buy 10,000 tool boxes at $11.90 per box, provided that the entire quantity is delivered in two months. The current per-box cost data are as follows: Direct materials. Direct labour (½ hour at $10.40/hour) Total manufacturing overhead Total unit product cost $ 3.60 5.20 3.10 $11.90 Both fixed and variable overhead are allocated using direct labour-hours as a base. Variable overhead is $2.60 per direct labour-hour. Without the order, Anchor would have enough business to operate at 4,800 direct labour-hours in each of the next two months. The regular selling price of the tool boxes is $14.90. A sales commission of 50 cents per unit is paid to sales representatives on all regular sales. No additional selling or administrative expenses are anticipated on account of accepting this special order and no commissions will be paid on this special order. The production manager is concerned about the labour time that 10,000 boxes would require. She cannot schedule overtime because Anchor has a policy against it. JCL will not accept fewer than 10,000 tool boxes. Therefore, in order to fill the special order, it would be necessary for Anchor Company to divert some of its regular sales to the special order. Required: 1-a. Prepare contribution margin income statements for the two-month period both with and without the special order. (Leave no cells blank - be certain to enter "0" wherever required.) ANCHOR COMPANY Contribution Margin Income Statement Without Special With Special Order Order
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 6,000 machine-
hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make
productive use of the excess capacity. JCL Ltd., a potential customer, has offered to buy 10,000 tool boxes at $11.90 per box, provided
that the entire quantity is delivered in two months. The current per-box cost data are as follows:
Direct materials.
Direct labour (½ hour at $10.40/hour)
Total manufacturing overhead
Total unit product cost
$ 3.60
5.20
3.10
$11.90
Both fixed and variable overhead are allocated using direct labour-hours as a base. Variable overhead is $2.60 per direct labour-hour.
Without the order, Anchor would have enough business to operate at 4,800 direct labour-hours in each of the next two months. The
regular selling price of the tool boxes is $14.90. A sales commission of 50 cents per unit is paid to sales representatives on all regular
sales.
No additional selling or administrative expenses are anticipated on account of accepting this special order and no commissions will be
paid on this special order.
The production manager is concerned about the labour time that 10,000 boxes would require. She cannot schedule overtime because
Anchor has a policy against it. JCL will not accept fewer than 10,000 tool boxes. Therefore, in order to fill the special order, it would be
necessary for Anchor Company to divert some of its regular sales to the special order.
Required:
1-a. Prepare contribution margin income statements for the two-month period both with and without the special order. (Leave no cells
blank - be certain to enter "0" wherever required.)
ANCHOR COMPANY
Contribution Margin Income Statement
Without Special With Special
Order
Order
Transcribed Image Text:Required:
1-a. Prepare contribution margin income statements for the two-month period both with and without the special order. (Leave no cells
blank - be certain to enter "0" wherever required.)
ANCHOR COMPANY
Contribution Margin Income Statement
Total sales revenue
Less: variable costs.
Less: fixed costs
Without Special With Special
Order
Order
O Accept
O Not Accept
Proy
Special Order.
11 of 13
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1-b. Based on financial considerations, should Anchor accept the order?
2. This part of the question is not part of your Connect assignment.
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