Gemerlapan Jewellery Sdn. Bhd. (GJSB) is considering a special order for 20 handerafted gold bracelets to be given to the clients’ high achieving staffs during their annual dinner. The special price offered for this order is RM2,499. The normal selling price of a gold bracelet is RM2,999 and its unit product cost is as shown below: : RM 2,100 : RM250 Manufacturing overhead : RM 25 Direct material Direct labour Additional information: Most of the manufacturing overhead is fixed and unaffected by variations in how much jewellery is produced in any given period. However, RM5 of the overhead is variable with respect to the number of bracelets produced. The customer who made this special order would like special filigree applied to the bracelets. This filigree would require additional material costing RM4 per bracelet and would also require acquisition of a special tool costing RM450 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. 1. 2. 3. REQUIRED: State the cost that is considered relevant in making decision related to a special order. (a) Recommend whether GJSB should accept or reject the special order. Support your recommendation with appropriate calculations. (b)
Gemerlapan Jewellery Sdn. Bhd. (GJSB) is considering a special order for 20 handerafted gold bracelets to be given to the clients’ high achieving staffs during their annual dinner. The special price offered for this order is RM2,499. The normal selling price of a gold bracelet is RM2,999 and its unit product cost is as shown below: : RM 2,100 : RM250 Manufacturing overhead : RM 25 Direct material Direct labour Additional information: Most of the manufacturing overhead is fixed and unaffected by variations in how much jewellery is produced in any given period. However, RM5 of the overhead is variable with respect to the number of bracelets produced. The customer who made this special order would like special filigree applied to the bracelets. This filigree would require additional material costing RM4 per bracelet and would also require acquisition of a special tool costing RM450 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. 1. 2. 3. REQUIRED: State the cost that is considered relevant in making decision related to a special order. (a) Recommend whether GJSB should accept or reject the special order. Support your recommendation with appropriate calculations. (b)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Gemerlapan Jewellery Sdn. Bhd. (GJSB) is considering a special order for
20 handerafted gold bracelets to be given to the clients' high achieving staffs during their
annual dinner.
The special price offered for this order is RM2,499. The normal selling price of a gold
bracelet is RM2,999 and its unit product cost is as shown below:
: RM 2,100
: RM250
Manufacturing overhead : RM 25
Direct material
Direct labour
Additional information:
Most of the manufacturing overhead is fixed and unaffected by variations in how
much jewellery is produced in any given period. However, RM5 of the overhead is
variable with respect to the number of bracelets produced.
The customer who made this special order would like special filigree applied to the
bracelets. This filigree would require additional material costing RM4 per bracelet
and would also require acquisition of a special tool costing RM450 that would
have no other use once the special order is completed.
This order would have no effect on the company's regular sales and the order
could be fulfilled using the company's existing capacity without affecting any
other order.
1.
2.
3.
REQUIRED:
(a)
State the cost that is considered relevant in making decision related to a special
order.
Recommend whether GJSB should accept or reject the special order. Support your
recommendation with appropriate calculations.
(b)
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