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1.
Introduction: The difference in costs between the variable alternative is used to calculate financial advantage and disadvantage.
To calculate: The lowest price that W could bid for the order and still cover its incremental
1.
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Answer to Problem 7.31C
The relevant cost of special order is $23,200.
Explanation of Solution
Relevant cost of W for the one-time special order of 20,000 pounds
Particular | Amount |
AG-5 Substitute of BH-3 on one for one basis to its total 3500 pounds if BH-3 is not in this order, it will be salvaged for $600 | 3,000 |
The remaining 2500 pound be AG-5 at a cost of $1.20 per pound | 4,200 |
KL-2 | |
CW-7 | 4,050 |
DF—6 use 3000 pound in inventory at $0.60 per pound (40.70 market price-$0.10 handling charge) And purchase the remaining 500 pound at $0.70 per pound | 2,150 |
Total direct material cost | 14,000 |
The direct material cost is $14,000.
Particular | Amount $ |
5600 | |
2100 | |
Total Direct labor cost | 7700 |
Hence the direct labor cost is $7,700
Variable overhead cost:
Thus the relevant cost of special order is $23,200
2.
Introduction: The difference in costs between the variable alternative is used to calculate financial advantage and disadvantage.
The price that W should quote Z for each 20,000 pound lot of the new compound
2.
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Answer to Problem 7.31C
The selling price is $44,800
Explanation of Solution
Selling price:
Particular | Amount $ |
AG-5 ( | 7200 |
KL-2 ( | 4200 |
CW-7 ( | 4050 |
DF-6 ( | 2450 |
Total direct material cost | 17900 |
The direct material cost is $17,900.
Particular | Amount in $ |
Regular time ( | 6300 |
Overtime premium
| 1050 |
Total direct labor cost | 7350 |
Manufacturing overhead cost:
The manufacturing overhead cost is $6,750
Particulars | Amount $ |
Full manufacturing cost | 32,000 |
Markup | 12,800 |
Selling price (full manufacturing cost plus markup) | 44,800 |
Thus the selling price is $44,800
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Chapter 7 Solutions
Managerial Accounting for Managers
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