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Diamond Platinum Silver RM RM RM 8,200.00 Selling price per unit Variable costs per unit: 6,500.00 6,400.00 Direct materials 1,500.00 1,200.00 1,000.00 1,200.00 Direct wages: Machinists (RM100.00/hour) Packers (RM50.00/hour) 1,000.00 800.00 50.00 40.00 10,000 75.00 50.00 Variable overheads 80.00 00.00 Expected sales (units) 5,000 8.000 The total annual fixed costs are RM1,800,000.00. The company has budgeted that only 200,000 hours of machinists will be available for its next year financial year. This will lead to a shortage of machinists' hours and the management of HAR Jewellery is considering the following options: Option 1: To utilise the existing machinists hours to produce the maximum profit available. Option 2: To increase the hourly rate for machinists to RM120.00 per hour. The management believed that this rate would attract additional machinists and hence, the HAR Jewellery is able to increase production to meet the expected sales. The rate would be payable to all machinists for the full financial year. No other change is made. REQUIRED: a. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 1 (show the contribution per unit for each product and its ranking in your working). b. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 2 (show the contribution per unit for each product in your working). c. Evaluate the options being considered by HAR Jewellery.

Diamond Platinum Silver RM RM RM 8,200.00 Selling price per unit Variable costs per unit: 6,500.00 6,400.00 Direct materials 1,500.00 1,200.00 1,000.00 1,200.00 Direct wages: Machinists (RM100.00/hour) Packers (RM50.00/hour) 1,000.00 800.00 50.00 40.00 10,000 75.00 50.00 Variable overheads 80.00 00.00 Expected sales (units) 5,000 8.000 The total annual fixed costs are RM1,800,000.00. The company has budgeted that only 200,000 hours of machinists will be available for its next year financial year. This will lead to a shortage of machinists' hours and the management of HAR Jewellery is considering the following options: Option 1: To utilise the existing machinists hours to produce the maximum profit available. Option 2: To increase the hourly rate for machinists to RM120.00 per hour. The management believed that this rate would attract additional machinists and hence, the HAR Jewellery is able to increase production to meet the expected sales. The rate would be payable to all machinists for the full financial year. No other change is made. REQUIRED: a. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 1 (show the contribution per unit for each product and its ranking in your working). b. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 2 (show the contribution per unit for each product in your working). c. Evaluate the options being considered by HAR Jewellery.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 14E
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HAR Jewellery is the largest jewellery retail chain store in Malaysia. With hundreds of years of jewellery making experience, the company has created famous jewellery sets that have been editorialized in top magazines and newspapers, and featured on prime time television. The following is the information related to its products: Diamond Platinum Silver RM RM RM Selling price per unit 8,200.00 6,500.00 6,400.00 Variable costs per unit: Direct materials 1,500.00 1,200.00 1,000.00 Direct wages: Machinists (RM100.00/hour) Packers (RM50.00/hour) 1,200.00 1,000.00 800.00 75.00 50.00 50.00 Variable overheads 80.00 60.00 40.00 Expected sales (units) 5.000 8,000 10.000 The total annual fixed costs are RM1,800,000.00. The company has budgeted that only 200,000 hours of machinists will be available for its next year financial year. This will lesd to a shortage of machinists' hours and the management of HAR Jewellery is considering the following options: Option 1: To utilise the existing machinists hours to produce the maximum profit available. Option 2: To increase the hourly rate for machinists to RM120.00 per hour. The management believed that this rate would attract additional machinists and hence, the HAR Jewellery is able to increase production to meet the expected sales. The rate would be payable to all machinists for the full financial year. No other change is made. REQUIRED: a. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 1 (show the contribution per unit for each product and its ranking in your working). b. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 2 (show the contribution per unit for each product in your working). c. Evaluate the options being considered by HAR Jewellery.
Transcribed Image Text:HAR Jewellery is the largest jewellery retail chain store in Malaysia. With hundreds of years of jewellery making experience, the company has created famous jewellery sets that have been editorialized in top magazines and newspapers, and featured on prime time television. The following is the information related to its products: Diamond Platinum Silver RM RM RM Selling price per unit 8,200.00 6,500.00 6,400.00 Variable costs per unit: Direct materials 1,500.00 1,200.00 1,000.00 Direct wages: Machinists (RM100.00/hour) Packers (RM50.00/hour) 1,200.00 1,000.00 800.00 75.00 50.00 50.00 Variable overheads 80.00 60.00 40.00 Expected sales (units) 5.000 8,000 10.000 The total annual fixed costs are RM1,800,000.00. The company has budgeted that only 200,000 hours of machinists will be available for its next year financial year. This will lesd to a shortage of machinists' hours and the management of HAR Jewellery is considering the following options: Option 1: To utilise the existing machinists hours to produce the maximum profit available. Option 2: To increase the hourly rate for machinists to RM120.00 per hour. The management believed that this rate would attract additional machinists and hence, the HAR Jewellery is able to increase production to meet the expected sales. The rate would be payable to all machinists for the full financial year. No other change is made. REQUIRED: a. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 1 (show the contribution per unit for each product and its ranking in your working). b. Prepare a statement to show the maximum profit HAR Jewellery could make under Option 2 (show the contribution per unit for each product in your working). c. Evaluate the options being considered by HAR Jewellery.
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