X Ltd. wants to replace one of its old machines. Three alternative machines namely M1, M2 and M3 are under its consideration. The costs associated with these machines are as under: M, M2 M3 Direct material cost p.u. 50 100 150 Direct labour cost pu. Variable overhead p.u. 40 70 200 10 30 50 Fixed cost p.a. 2,50,000 1,50,000 70,000 Compute the cost indifference points for these altematives.

X Ltd. wants to replace one of its old machines. Three alternative machines namely M1, M2 and M3 are under its consideration. The costs associated with these machines are as under: M, M2 M3 Direct material cost p.u. 50 100 150 Direct labour cost pu. Variable overhead p.u. 40 70 200 10 30 50 Fixed cost p.a. 2,50,000 1,50,000 70,000 Compute the cost indifference points for these altematives.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40 45…
An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.
Cost of the three alternative methods of processing work in an office is stated below:A-Manual: Total fixed cost PM=3,000Variable cost per case=48B-Semi-Automatic:Total fixed cost PM=9,000Variable cost per case=28C-Fully automatic:Total fixed cost PM=25,000Variable cost per case=8Identify the indifference and state your results. For what volume of cases it will be preferred between each of A, B and C?
1. Compare the difference between purchasing and operating of machine operated as given table (Minimum Acceptable Rate of Return, MARR = 10%). Table 4.13 Cost estimation of integrated machine option Integrated metal casting Half integrated metal casting Solely metal casting production with core knock- production with core knock- production without core out system. Machining will be out system and CNC knock-out system and CNC machining center machining center outsource (outsource) Purchasing cost, $ 500000 220000 150000 Annual maintenance, salary and operating cost (together with outsourcing cost), $ 90000 55000 10000 Annual revenue, $ 150000 75000 50000 Salvage value, $ 2000 25000 30000 Life years 5. 10
What is the breakeven point under (a) variable costing and (b) absorption costing?
Solve 2, the first answer is the wrong. Find the lowest acceptable transfer price.
Select all that are true with respect to comparing machines with unequal lives - i.e., choosing the best machine for the project. Group of answer choices If you simply estimate NPV without accounting for the different lives, NPV may lead to an incorrect decision You cannot use NPV to make this decision If you estimate NPV CORRECTLY, it will lead you to the correct decision One way to handle this type of decision, is to use what is called "equivalent annual cost" (EAC), which is essentially the all-in annual economic cost of the machine Estimate equivalent annual cost (EAC) by taking the NPV of the machine and dividing by its useful life
Can you please explain the statement with an example? Also, check whether my understanding of the example is correct. "If using the same unit fixed costs at different output levels, managers may reach erroneous conclusions. Total fixed costs should be used." My Understanding: For example, if the capacity is 1000 and currently we produce 1000 units and sell it for $20 per unit, variable cost $5 and the fixed cost $10 per unit (within the relevant range); and we have a special order to produce 1200 units for $8 per unit. Should we include additional the Total Fixed Cost of $10000, which is (10*1000) for the range (1001-2000) plus $10000 for the range (0-1000), which means, we will have a total fixed cost of $20000.
Cost of the three alternative methods of processing work in an office is stated below: A-Manual: Total fixed cost PM=3,000 Variable cost per case=48 B-Semi-Automatic: Total fixed cost PM=9,000 Variable cost per case=28 C-Fully automatic: Total fixed cost PM=25,000 Variable cost per case=8 Identify the indifferences.
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period.e a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product- Budgeted annual production (units) 15,000- 24,000 20,000 $ per unita $ per unite $ per unita Direct materials 354 40 45a…
Fast solve plz