User Account

All Pages

Special order manufacturer, Managerial Accounting

Assignment Help:
Viti Ltd, located in southern Viti Levu, manufactures a variety of industrial
valves and pipe fittings that are sold to customers in the eastern states.
Currently, the company is operating at about 70 per cent of capacity and is
earning satisfactory return on investment. Management has been approached by
Vanua Industries Ltd of Solomon Islands with an offer to buy 120,000units of
pressure valve. Vanua Industries Ltd manufactures a valve that is almost
identical to the pressure valve produced by Viti; however, a fire in Vanua
Industries’ valve plant has shut down its manufacturing operations. Vanua
needs the 120,000 valves over the next four months to meet commitments to its
regular customers. Vanua is prepared to pay $19 each for the valves. The cost of
the pressure valve produced by Viti, which is based on current attainable
standards, is $20, calculated as follows:
Direct material $5.00
Direct labour 6.00
Manufacturing overhead 9.00
$20.00
Manufacturing overhead is applied to production at the rate of $18 per standard
direct labour. This overhead rate is made up of the following components:
Variable manufacturing overhead $6.00
Fixed manufacturing overhead (traceable) 8.00
Fixed manufacturing overhead (allocated) 4.00
Applied manufacturing overhead rate $18.00
Additional costs incurred in connection with sales of the pressure valve include
sales commission of 5 per cent of sales, and freight expense of $1 per unit.
However, the company does not pay sales commissions on special orders that
come directly to management. In determining selling prices, Viti adds a 40 per
cent mark-up to total product cost. This provides a $28 suggested selling price
for the pressure valve. The marketing department, however, has set the current
selling price at $27 in order to maintain market share. Production management
believes it can handle the Vanua Industries order without disrupting its
scheduled production. The order would, however, require additional fixed
3
factory overhead of $12,000 per month in the form of supervision and clerical
costs. If management accepts the order, 30,000 pressure valves will be
manufactured and shipped to Vanua industries each month for the next four
months. Vanua’s management has agreed to pay the shipping charge for the
valve.
Required:
1. Determine how many direct labour hours would be required each month
to fill the Vanua industries order. (5 marks)
2. Prepare an analysis showing the impact of accepting the Vanua Industries
order (15 marks)
3. Calculate the minimum unit price that management of Viti could accept
for the Vanua Industries order without reducing net profit. (5 marks)
4. Identify the factors, other than price, that Viti Ltd should consider before
accepting the Vanua Industries order.

Related Discussions:- Special order manufacturer

Compute the effect of relaxing credit effort on net profit, M/s ABC is seei...

M/s ABC is seeing relaxing its collection efforts. At current its sales are as Rs.40 lakhs, the ACP is here 20 days and variable cost to sales ratio is .8 and bad debts are as .05

Estimate the total fixed cost, Question:   (a) For a business annual sa...

Question:   (a) For a business annual sales are Rs 50,000 and variable expenses are Rs 35,000 and fixed expenses are Rs 25,000. The owner wants to earn at least Rs 5,000 as pro

Interger programing emuneration method, #questihow do we use emuneration me...

#questihow do we use emuneration method in interger programing

Define materials cost variance, Define Materials cost variance Material...

Define Materials cost variance Material cost variance (MCV) is the difference between the standard cost of material specified and the actual cost of materials used." It is the

Long run shutdown point, what are the factors should be considered before ...

what are the factors should be considered before terminated the operation of a losing firm??

Learning curve theory, LEARNING CURVE THEORY The first time a new opera...

LEARNING CURVE THEORY The first time a new operation is performed both workers and operating procedures are untried but as the operation is replaced the workers becomes more fa

Calculate the total revenue obtainable when the market clear, Question: ...

Question: (a) (I) The following equations relate to the market conditions for pullovers at a given point of time: Demand Function: Q d = 1200 - P Supply Function: Q s

Advantages and limitations of game theory, Advantages and limitations of ga...

Advantages and limitations of game theory Advantage: Game theory helps us to learn how to approach and understand a conflict situation and to improve the decision maki

Finance, using the operating cycle and any other financial management knowl...

using the operating cycle and any other financial management knowledge,discuss the applicabilty of such cycle to poultry

Steps of graphic analysis, Steps of Graphic Analysis There are four ste...

Steps of Graphic Analysis There are four steps in using graph paper to study cost-volume relationships: Step 1: Compute the scale which you will use: Volume is considered

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd