akes a single product which sells for Rs.20, and for which there is a great demand. It has a variable cost of Rs.12, made up as follows: Rs. Direct material Direct labour (2 hrs) 6 Variable Overhead 2 12 4 The labour force is currently working at full capacity producing a product that earns a contribution of Rs.4 per labour hour. A customer has approached the company with a request for the manufacturing of a special contract for which he is willing to pay Rs.5,500. The costs of the contact would be Rs.2,000 for direct materials, and 500 labour hours will be required. Required: Whether the contract should be accepted or not?

akes a single product which sells for Rs.20, and for which there is a great demand. It has a variable cost of Rs.12, made up as follows: Rs. Direct material Direct labour (2 hrs) 6 Variable Overhead 2 12 4 The labour force is currently working at full capacity producing a product that earns a contribution of Rs.4 per labour hour. A customer has approached the company with a request for the manufacturing of a special contract for which he is willing to pay Rs.5,500. The costs of the contact would be Rs.2,000 for direct materials, and 500 labour hours will be required. Required: Whether the contract should be accepted or not?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of $400 and $800, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 400 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. Objective function: Max Z = $400 A + $800 B Subject to: fill in the blank 1 A + fill in the blank 2 B ≤ fill in the blank 3 2. Identify the optimal amount that should be produced of each machine part. If none of the components should be produced, enter "0" for your answer. Component A fill in the blank 4 units Component B fill in the blank 5 units Identify the total contribution margin associated with this mix.$fill in the blank 6
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The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product. 2. (a) Describe two (2) methods for allocating support costs to departments. (b) Explain why support costs are allocated to departments. Please answer question 2 thank you very much.