Martin Industries is considering to supply it's products- a special range of namkeens – to a departmental store. The contract will last for 50 weeks, and the details are given below: Material : $ X (in stock-at original cost) Y (on order-on contract) z (to be ordered) 1,50,000 1,80,000 3,00,000 Labour : Skilled 5,40,000 Non-skilled 3,00,000 1,00,000 Supervisory General Overheads Total Cost Price offered by departmental store 10,80,000 26,50,000 18,00,000 Net Loss 8,50,000 Should the contract be accepted if the following additional information is considered ? Material X is an obsolete material. It can only be used on another product, the material for which is available at $ 1,35,000 (Material X requires some adaptation to be used and costs $ 27,000). Material Y is ordered for some other product which is no longer required. It now has a residual value of $ 2,10,000. (1) (11) (1II) Skilled labour can work on other contracts which are presently operated by semi-skilled labour at a cost of $ 5,70,000. (IV) Non-skilled labour are specifically employed for this contract. (V) Supervisory staff will remain whether or not the contract is accepted. Only two of them can replace other positions where the salary is $ 35,000. Overheads are charged at 200% of skilled labour. Only $ 1,25,000 would be avoidable, if the contract is not accepted. (VI)
Martin Industries is considering to supply it's products- a special range of namkeens – to a departmental store. The contract will last for 50 weeks, and the details are given below: Material : $ X (in stock-at original cost) Y (on order-on contract) z (to be ordered) 1,50,000 1,80,000 3,00,000 Labour : Skilled 5,40,000 Non-skilled 3,00,000 1,00,000 Supervisory General Overheads Total Cost Price offered by departmental store 10,80,000 26,50,000 18,00,000 Net Loss 8,50,000 Should the contract be accepted if the following additional information is considered ? Material X is an obsolete material. It can only be used on another product, the material for which is available at $ 1,35,000 (Material X requires some adaptation to be used and costs $ 27,000). Material Y is ordered for some other product which is no longer required. It now has a residual value of $ 2,10,000. (1) (11) (1II) Skilled labour can work on other contracts which are presently operated by semi-skilled labour at a cost of $ 5,70,000. (IV) Non-skilled labour are specifically employed for this contract. (V) Supervisory staff will remain whether or not the contract is accepted. Only two of them can replace other positions where the salary is $ 35,000. Overheads are charged at 200% of skilled labour. Only $ 1,25,000 would be avoidable, if the contract is not accepted. (VI)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Martin Industries is considering to supply it's products- a special range of namkeens – to a
departmental store. The contract will last for 50 weeks, and the details are given below:
Material :
$
X (in stock-at original cost)
Y (on order-on contract)
z (to be ordered)
1,50,000
1,80,000
3,00,000
Labour :
Skilled
5,40,000
Non-skilled
3,00,000
1,00,000
Supervisory
General Overheads
10,80,000
Total Cost
Price offered by departmental store
26,50,000
18,00,000
Net Loss
8,50,000
Should the contract be accepted if the following additional information is considered ?
Material X is an obsolete material. It can only be used on another product, the material
for which is available at $ 1,35,000 (Material X requires some adaptation to be used and
costs $ 27,000).
Material Y is ordered for some other product which is no longer required. It now has a
residual value of $ 2,10,000.
(1)
(11)
(1II)
Skilled labour can work on other contracts which are presently operated by semi-skilled
labour at a cost of $ 5,70,000.
(IV)
Non-skilled labour are specifically employed for this contract.
(V)
Supervisory staff will remain whether or not the contract is accepted. Only two of them
can replace other positions where the salary is $ 35,000.
Overheads are charged at 200% of skilled labour. Only $ 1,25,000 would be avoidable, if
the contract is not accepted.
(VI)
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