High Tech Bhd manufactures a specialized equipment that is used in scientific research and practice. The followings are the production cost information for the specialized equipment: А. RM Production cost: Direct materials 680,000 Direct Labour 500,000 Variable overhead 190,000 Fixed overhead 270,000 Administrative cost: Variable 250,000 Fixed 320,000 Selling and distribution cost: Variable 20,000 Fixed 130,000 The production manager of the High Tech Bhd has suggested that a profit margin of 25% on full cost should be charged for every product sold. However, the marketing manager of the company commented that fixed costs are considered as unavoidable and they should be excluded when setting prices for the product. He further suggested that price should be set total variable cost plus 50%. At present, the normal sales volume is 200,000 units. Required: Calculate the selling price of the specialized equipment: a. i. according to the suggestion of the production manager ii. according to the proposal of the marketing manager b. Explain which selling price that would you suggest to be adopted by High Tech Bhd.

High Tech Bhd manufactures a specialized equipment that is used in scientific research and practice. The followings are the production cost information for the specialized equipment: А. RM Production cost: Direct materials 680,000 Direct Labour 500,000 Variable overhead 190,000 Fixed overhead 270,000 Administrative cost: Variable 250,000 Fixed 320,000 Selling and distribution cost: Variable 20,000 Fixed 130,000 The production manager of the High Tech Bhd has suggested that a profit margin of 25% on full cost should be charged for every product sold. However, the marketing manager of the company commented that fixed costs are considered as unavoidable and they should be excluded when setting prices for the product. He further suggested that price should be set total variable cost plus 50%. At present, the normal sales volume is 200,000 units. Required: Calculate the selling price of the specialized equipment: a. i. according to the suggestion of the production manager ii. according to the proposal of the marketing manager b. Explain which selling price that would you suggest to be adopted by High Tech Bhd.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...

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The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
Larsen, Inc., produces two types of electronic parts and has provided the following data: Part X12 Part YK7 Total Units produced 100,000 600,000 — Direct labor hours 30,000 70,000 100,000 Machine hours 50,000 300,000 350,000 Number of setups 40 80 120 Testing hours 1,000 9,000 10,000 Number of purchase orders 500 3,500 4,000 There are four activities: machining, setting up, testing, and purchasing. Required: Calculate the activity consumption ratios for each product. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plant wide rate? Which product is under costed? What if the machine hours were used…
Larsen, Inc., produces two types of electronic parts and has provided the following data: PartX12 PartYK7 Total Units produced 100,000 600,000 - Direct labour hours 30,000 70,000 100,000 Machine hours 50,000 300,000 350,000 Number of setups 40 80 120 Testing hours 1,000 9,000 10,000 Number of purchase orders 500 3,500 4,000 There are four activities: machining, setting up, testing, and purchasing. Required: Calculate the activity consumption ratios for each product. Calculate the consumption ratios for the plantwide rate (direct labour hours). When comparedwith the activity ratios, what can you say about the relative accuracy of a plantwiderate? Which product is undercosted? What if the machine hours were used for the plantwide rate? Would this remove the cost distortionof a plantwide rate?
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The Blaine Company is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal £240,000. Of this amount, depreciation totals £80,000 (all fixed) and lubrication totals £72,000 (all variable). The remaining £88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals £112,000.Assume that the relevant range includes all of the activity levels mentioned in this problem.The variable cost per setup for utilities is most likely closest to: £4.00 £12.44 £14.66 £8.00
A factory producing article X also produces a by-product Y which is further processed into finished product. The joint cost of manufacturing is given below: Material RO 8,000 Labor RO 4,000 Overheads RO 2,000 Subsequent costs are given below: X Y Material RO 2,000 RO 4,000 Labor RO 4,000 RO 3,000 Overheads RO 2,400 RO 2,600 Sales value for X is RO 20,000 and Y is RO 30,000Estimated profits on selling prices are 40% for X and 30% for Y. Assume that selling and distributing expenses are in proportion of subsequent cost of material.a. Show how you would apportion joint cost of manufacture.b. Prepare a statement showing cost of production of X and Y.
In 20x2, Choctaw Company implements a new process affecting labor and materials. Choctaw Company provides the following information so that total productivity can be valued: 20x1 20x2 Number of units produced 570,000 480,000 Labor hours used 190,000 240,000 Materials used (lbs.) 2,850,000 1,600,000 Unit selling price $22 $24 Wages per labor hour $12 $14 Cost per pound of material $3.40 $3.50 Required: 1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2. If required, round your answers to the nearest dollar. Cost of labor $fill in the blank Cost of materials $fill in the blank Total PQ cost $fill in the blank The actual cost of inputs for 20x2 are Cost of labor $3,360,000 Cost of materials $5,600,000 Total current cost $8,960,000 2. What is the net value of the productivity changes? If required, round your answers to the nearest dollar.$fill in the blank How much profit change is attributable to each…
UESTION 1Trinity product Limited makes and sells three types of electronic security systems for which the following information is available Standard cost and selling price per unitDay Scan Night scanOmni scanGH¢GH¢GH¢Material70110155Manufacturing labour405570Installation labour243244Variable overheads162028Selling price250320460 Fixed cost for the period are GH¢450,000 and installation labour, which is highly skilled is available for 25,000 hours only in a period and is paid GH¢8 per hour. Both manufacturing and installation labour are variable cost. The maximum demand for the period is: Day scan 2,000 units; Night scan 3,000 units; Omni scan 1,800 units.Requireda) Calculate the shortfall (if any) in hours of installation labour.b) Determine the best production plan assuming the company wishes to maximize profit. c) calculate the maximum profit that could be achieved from the plan in part (b) aboved) Having carried out an investigation of the availability of installation labour, the…
Trinity product Limited makes and sells three types of electronic security systems for which the following information is available Standard cost and selling price per unitDay Scan Night scanOmni scanGH¢GH¢GH¢Material70110155Manufacturing labour405570Installation labour243244Variable overheads162028Selling price250320460 Fixed cost for the period are GH¢450,000 and installation labour, which is highly skilled is available for 25,000 hours only in a period and is paid GH¢8 per hour. Both manufacturing and installation labour are variable cost. The maximum demand for the period is: Day scan 2,000 units; Night scan 3,000 units; Omni scan 1,800 units.Requiredd) Having carried out an investigation of the availability of installation labour, the firm thinks that by offering GHS 12 per hour, additional installation would become available and thus overcome the labour shortage. Based on the result obtained above, you are required to advice the firm whether or not to implement this proposal.