Cinta Berhad is a company that produces hand and body lotion for domestic and overseas market. One of its products is Cerah that is sold to wholesalers in a tube, with a price of RM8 per box of 24 tubes. The company manufactures 100,000 boxes of Cerah every year and there is a fixed cost of RM90,000 charge to the manufacturing overhead annually. The manufacturing cost per box of product Cerah including the cost of the tube is as follows: a. b. Direct materials Direct labour As an alternative to making the tube internally, Cinta Berhad can purchase the empty tubes from an outside supplier at a price of RM1.35 per box of 24 tubes. If Cinta Berhad accept the purchase proposal, the direct labour and variable manufacturing overhead costs per box would be reduced by 10% and the direct materials would be reduced by 25%. In view of this, the Marketing manager suggested the company to buy the tubes of Cerah from the outside supplier. Required: C. Manufacturing overhead Total unit cost RM 3.60 2.00 1.40 7.00 Advise Cinta Berhad on whether the tubes of Cerah should be purchased from outside supplier. Prepare the relevant costs analysis to support your decision. Instead of sales of 100,000 boxes of Cerah, a revised sales order shows an estimation of sales volume of 120,000 boxes. However, additional equipment must be acquired to manufacture the tubes at an annual rental of RM40,000. Advise the management of Cinta Berhad on whether to make or buy the tubes of Cerah. Prepare the relevant analysis to support your decision. Briefly explain FOUR (4) qualitative factors that should Cinta Berhad consider in making decision whether they should make or buy the tubes.
Cinta Berhad is a company that produces hand and body lotion for domestic and overseas market. One of its products is Cerah that is sold to wholesalers in a tube, with a price of RM8 per box of 24 tubes. The company manufactures 100,000 boxes of Cerah every year and there is a fixed cost of RM90,000 charge to the manufacturing overhead annually. The manufacturing cost per box of product Cerah including the cost of the tube is as follows: a. b. Direct materials Direct labour As an alternative to making the tube internally, Cinta Berhad can purchase the empty tubes from an outside supplier at a price of RM1.35 per box of 24 tubes. If Cinta Berhad accept the purchase proposal, the direct labour and variable manufacturing overhead costs per box would be reduced by 10% and the direct materials would be reduced by 25%. In view of this, the Marketing manager suggested the company to buy the tubes of Cerah from the outside supplier. Required: C. Manufacturing overhead Total unit cost RM 3.60 2.00 1.40 7.00 Advise Cinta Berhad on whether the tubes of Cerah should be purchased from outside supplier. Prepare the relevant costs analysis to support your decision. Instead of sales of 100,000 boxes of Cerah, a revised sales order shows an estimation of sales volume of 120,000 boxes. However, additional equipment must be acquired to manufacture the tubes at an annual rental of RM40,000. Advise the management of Cinta Berhad on whether to make or buy the tubes of Cerah. Prepare the relevant analysis to support your decision. Briefly explain FOUR (4) qualitative factors that should Cinta Berhad consider in making decision whether they should make or buy the tubes.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cinta Berhad is a company that produces hand and body lotion for domestic and overseas
market. One of its products is Cerah that is sold to wholesalers in a tube, with a price of RM8
per box of 24 tubes. The company manufactures 100,000 boxes of Cerah every year and there
is a fixed cost of RM90,000 charge to the manufacturing overhead annually. The
manufacturing cost per box of product Cerah including the cost of the tube is as follows:
RM
Direct materials
3.60
Direct labour
2.00
Manufacturing overhead
1.40
Total unit cost
7.00
As an alternative to making the tube internally, Cinta Berhad can purchase the empty tubes
from an outside supplier at a price of RM1.35 per box of 24 tubes. If Cinta Berhad accept the
purchase proposal, the direct labour and variable manufacturing overhead costs per box would
be reduced by 10% and the direct materials would be reduced by 25%. In view of this, the
Marketing manager suggested the company to buy the tubes of Cerah from the outside
supplier.
Required:
Advise Cinta Berhad on whether the tubes of Cerah should be purchased from outside
supplier. Prepare the relevant costs analysis to support your decision.
a.
b.
Instead of sales of 100,000 boxes of Cerah, a revised sales order shows an estimation of
sales volume of 120,000 boxes. However, additional equipment must be acquired to
manufacture the tubes at an annual rental of RM40,000. Advise the management of
Cinta Berhad on whether to make or buy the tubes of Cerah. Prepare the relevant
analysis to support your decision.
Briefly explain FOUR (4) qualitative factors that should Cinta Berhad consider in
making decision whether they should make or buy the tubes.
С.
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