Discuss whether product C19 should be processed further or sold at the split-off point. Show all computations. (b) Assuming that the company has no alternative use for the facilities that are now being used to produce the herbs, explain whether the outside supplier’s offer should be accepted or not. Show all computations. (c) Suppose that if the herbs were purchased, CE could use the freed capacity to launch a new product that could generate a segment margin of RM150,000 per year.Calculate whether CE should accept the offer to buy the herbs for RM35 per unit or not. Show all computations.
Corona Enterprise (CE) produces a variety of herbs from processing 1 ton of Krypton, a rare mineral. Material and
RM/unit herb RM/15,000unit herbs
Direct materials (Krypton) 14 210,000
Direct labour 10 150,000
Variable manufacturing
Fixed manufacturing overhead, traceable 6* 90,000
Fixed manufacturing overhead, allocated 9 135,000
Total cost 42 630,000
*1/3 supervisory salaries; 2/3
Discuss whether product C19 should be processed further or sold at the split-off
point. Show all computations.
(b) Assuming that the company has no alternative use for the facilities that are now being used to produce the herbs, explain whether the outside supplier’s offer should be accepted or not. Show all computations.
(c) Suppose that if the herbs were purchased, CE could use the freed capacity to launch a new product that could generate a segment margin of RM150,000 per year.Calculate whether CE should accept the offer to buy the herbs for RM35 per unit or not. Show all computations.
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