Famay Sdn Bhd (FSB) is a manufacturing company that produces high-technology electrical products. One of the items used in the product is component M-2712. Each month, 10 units of M-2712 is required in production. Currently, component M-2712 is produces internally with the following costs incurred:Direct material RM500Direct labor RM4,000Manufacturing overhead 150% of direct laborMaterial handling 20% from direct materialAdditional information related to production of M-2712 are as below:i. Material handling is a separate charge in addition to manufacturing overhead. It involves the variable cost at Receiving Department that apply to direct material and purchased components on the basis of their cost.ii. Manufacturing overhead cost consists of ⅓ variable cost, and ⅔ fixed cost.Currently, there are one company approach FSB to supply components M-2712 at a unit price of RM7,500. FSB has three options regarding the empty spaces if they choose to accept the offer from outside supplier:i. The empty spaces will remain idle.ii. FSB able to rent out the empty space for RM12,500 per month.iii. FSB can use the empty space to manufacture new product that would contribute RM26,000 every month.REQUIRED:(a) Evaluate each option for FSB regarding the empty spaces. Show all workings.(b) Justify whether the decision to accept the offer from outside supplier on components M-2712 is a correct decision made by FSB.
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.
Famay Sdn Bhd (FSB) is a manufacturing company that produces high-technology electrical products. One of the items used in the product is component M-2712. Each month, 10 units of M-2712 is required in production. Currently, component M-2712 is produces internally with the following costs incurred:
Direct material RM500
Direct labor RM4,000
Manufacturing overhead 150% of direct labor
Material handling 20% from direct material
Additional information related to production of M-2712 are as below:
i. Material handling is a separate charge in addition to manufacturing overhead. It involves the variable cost at Receiving Department that apply to direct material and purchased components on the basis of their cost.
ii.
Currently, there are one company approach FSB to supply components M-2712 at a unit price of RM7,500. FSB has three options regarding the empty spaces if they choose to accept the offer from outside supplier:
i. The empty spaces will remain idle.
ii. FSB able to rent out the empty space for RM12,500 per month.
iii. FSB can use the empty space to manufacture new product that would contribute RM26,000 every month.
REQUIRED:
(a) Evaluate each option for FSB regarding the empty spaces. Show all workings.
(b) Justify whether the decision to accept the offer from outside supplier on components M-2712 is a correct decision made by FSB.
Step by step
Solved in 2 steps with 6 images
