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Excell Bhd produces and sells a single product named Champ. The company operates at its ormal capacity of 30,000 units per year. Costs associated with this level of production and ales are as follows: Unit Total (30,000 units) RM RM 450,000 240,000 90,000 Direct materials 15 Direct labour 8 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses 3 9 270,000 4 120,000 180,000 1,350,000 Total cost 45 he product is sold for RM50 each. Fixed manufacturing overhead is constant at RM270,000 er year within the range of 25,000 units to 30,000 Champs per year. Required: Due to Covid-19 pandemic, Excell Bhd expects to sell only 25,000 units of Champ through egular channels in year 2021. Assuming the following special orders have been received by ne company in year 2021. . Alliance Sdn. Bhd. has offered to purchase 5,000 units of Champ if Excell Bhd. willing to accept a 16% discount off the regular selling price. There would be no sales commissions on this order; thus, variable expenses would be reduced by 75%. However, Excell Bhd. would have to purchase a special machine to engrave Alliance Sdn Bhd's name on the 5,000 units. This machine would cost RM10,000. Excell Bhd. has no assurance that Alliance Sdn. Bhd will purchase additional units in the future. Evaluate the impact on profit if this special order is accepted.

Excell Bhd produces and sells a single product named Champ. The company operates at its ormal capacity of 30,000 units per year. Costs associated with this level of production and ales are as follows: Unit Total (30,000 units) RM RM 450,000 240,000 90,000 Direct materials 15 Direct labour 8 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses 3 9 270,000 4 120,000 180,000 1,350,000 Total cost 45 he product is sold for RM50 each. Fixed manufacturing overhead is constant at RM270,000 er year within the range of 25,000 units to 30,000 Champs per year. Required: Due to Covid-19 pandemic, Excell Bhd expects to sell only 25,000 units of Champ through egular channels in year 2021. Assuming the following special orders have been received by ne company in year 2021. . Alliance Sdn. Bhd. has offered to purchase 5,000 units of Champ if Excell Bhd. willing to accept a 16% discount off the regular selling price. There would be no sales commissions on this order; thus, variable expenses would be reduced by 75%. However, Excell Bhd. would have to purchase a special machine to engrave Alliance Sdn Bhd's name on the 5,000 units. This machine would cost RM10,000. Excell Bhd. has no assurance that Alliance Sdn. Bhd will purchase additional units in the future. Evaluate the impact on profit if this special order is accepted.

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter5: Process Costing
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Excell Bhd produces and sells a single product named Champ. The company operates at its normal capacity of 30,000 units per year. Costs associated with this level of production and sales are as follows: Unit Total (30,000 units) RM RM Direct materials 15 450,000 Direct labour 8 240,000 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses 3 90,000 9 270,000 4 120,000 6 180,000 1,350,000 Total cost 45 The product is sold for RM50 each. Fixed manufacturing overhead is constant at RM270,000 per year within the range of 25,000 units to 30,000 Champs per year. Required: Due to Covid-19 pandemic, Excell Bhd expects to sell only 25,000 units of Champ through regular channels in year 2021. Assuming the following special orders have been received by the company in year 2021. a. Alliance Sdn. Bhd. has offered to purchase 5,000 units of Champ if Excell Bhd. willing to accept a 16% discount off the regular selling price. There would be no sales commissions on this order; thus, variable expenses would be reduced by 75%. However, Excell Bhd. would have to purchase a special machine to engrave Alliance Sdn Bhdʻs name on the 5,000 units. This machine would cost RM10,000. Excell Bhd. has no assurance that Alliance Sdn. Bhd will purchase additional units in the future. Evaluate the impact on profit if this special order is accepted.
Transcribed Image Text:Excell Bhd produces and sells a single product named Champ. The company operates at its normal capacity of 30,000 units per year. Costs associated with this level of production and sales are as follows: Unit Total (30,000 units) RM RM Direct materials 15 450,000 Direct labour 8 240,000 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses 3 90,000 9 270,000 4 120,000 6 180,000 1,350,000 Total cost 45 The product is sold for RM50 each. Fixed manufacturing overhead is constant at RM270,000 per year within the range of 25,000 units to 30,000 Champs per year. Required: Due to Covid-19 pandemic, Excell Bhd expects to sell only 25,000 units of Champ through regular channels in year 2021. Assuming the following special orders have been received by the company in year 2021. a. Alliance Sdn. Bhd. has offered to purchase 5,000 units of Champ if Excell Bhd. willing to accept a 16% discount off the regular selling price. There would be no sales commissions on this order; thus, variable expenses would be reduced by 75%. However, Excell Bhd. would have to purchase a special machine to engrave Alliance Sdn Bhdʻs name on the 5,000 units. This machine would cost RM10,000. Excell Bhd. has no assurance that Alliance Sdn. Bhd will purchase additional units in the future. Evaluate the impact on profit if this special order is accepted.
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