Question -Mahila Griha Udyog Industries is considering to supply its products - a special range of namkeens - to a departmental store. The contract will last for 50 weeks, and the details are given below: Material: Rs. X (in stock - at original cost) 1,50,000 Y (on order - on contract) z (to be ordered) Labour 1,80,000 3,00,000 Skilled 5,40,000 Non-skilled 3,00,000 Supervisory 1,00,000 General overheads 10,80,000 Total cost 26,50,000 Price offered by department store 8,00,000 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 Rs.1,35,000 (Material X requires some adaptation to be used and cost Rs.27,000). (W) Material Y is ordered for some other product which is no longer required. It now has residual value of Rs.27,000). (Hi) Skilled labour can work on other contracts which are presently operated by semi-skilled labour at a cost of Rs.5,70,000. (w) Non-skilled labour are specifically employed for this contract. (v) Supervisor staff will remain whether or not the contract is accepted. Only two of them can replace other positions where the salary is Rs.35,000. Overheads are charged at 200% of skilled labour. Only s.1,25,000 would be avoidable, if the contract is not accepted.
Question -Mahila Griha Udyog Industries is considering to supply its products - a special range of namkeens - to a departmental store. The contract will last for 50 weeks, and the details are given below: Material: Rs. X (in stock - at original cost) 1,50,000 Y (on order - on contract) z (to be ordered) Labour 1,80,000 3,00,000 Skilled 5,40,000 Non-skilled 3,00,000 Supervisory 1,00,000 General overheads 10,80,000 Total cost 26,50,000 Price offered by department store 8,00,000 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 Rs.1,35,000 (Material X requires some adaptation to be used and cost Rs.27,000). (W) Material Y is ordered for some other product which is no longer required. It now has residual value of Rs.27,000). (Hi) Skilled labour can work on other contracts which are presently operated by semi-skilled labour at a cost of Rs.5,70,000. (w) Non-skilled labour are specifically employed for this contract. (v) Supervisor staff will remain whether or not the contract is accepted. Only two of them can replace other positions where the salary is Rs.35,000. Overheads are charged at 200% of skilled labour. Only s.1,25,000 would be avoidable, if the contract is not accepted.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Question -Mahila Griha Udyog Industries is considering to supply its products - a special range of namkeens - to a
departmental store. The contract will last for 50 weeks, and the details are given below:
Material: Rs.
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
Supervisory
1,00,000
General overheads
10,80,000
Total cost
26,50,000
Price offered by department store
8,00,000
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
Rs.1,35,000 (Material X requires some adaptation to be used and cost Rs.27,000).
(i) Material Y is ordered for some other product which is no longer required. It now has residual
value of Rs.27,000).
(ii) Skilled labour can work on other contracts which are presently operated by semi-skilled labour
at a cost of Rs.5,70,000.
(iv) Non-skilled labour are specifically employed for this contract.
(v) Supervisor staff will remain whether or not the contract is accepted. Only two of them can replace other positions
where the salary is Rs.35,000. Overheads are charged at 200% of skilled labour. Only s.1,25,000 would be avoidable, if the
contract is not accepted.
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