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Question 1: Chelsea Company manufactures a computer component. Currently, the cost per unit consists of Direct materials at P20; direct labor costs at P200; variable overhead at P100; and fixed overhead at P160. Adrian company approached Chelsea with an offer to sell 4,000 units of the component for P440 per unit. If Chelsea accepts the proposal, P1,000,000 of the fixed overhead will be eliminated. Should Chelsea, make or buy the component? How much will be saved?
The company's production manager stated that 'Favourable variances are good news and therefore, require no investigation'. Do you agree?
Tercer reports the following on one of its products. Compute the direct materials price and quantity variances.
What the variable cost per machine hour for Swan was? The company observed that at 20,000 machine hours of activity, total maintenance costs
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Explain. What journal entry would be made for the days worked and what entry would be made when the wages are paid on Saturday?
Critics of absorption costing have increasingly emphasized its potential for leading to undesirable incentives for managers. Give an example.
What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
Prepare A flexible budget for 12,000 units of production would show. Miller and Sons' static budget for 10,000 units of production
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Even though costs, revenues, and other factors do not vary among possible courses of action, they may be relevant to a decision. True/false
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