Question 1Study the scenario and complete the questions that follow:Bonmarche LtdBonmarche Ltd produces trophies and other memorabilia. Its financial director is always on the lookoutfor new opportunities.Bonmarche Ltd incurs the following costs:DescriptionRand valueDirect materialR100 per unitDirect labourR50 per hourVariable overheadsR20 per unitManufacturing fixed costR500000 in totalCompany fixed costR600000 in total Additional notes: A new opportunity has arisen whereby Bonmarche Ltd can buy 50% of its production units from anindependent supplier at R180 per unit. Bonmarche Ltd produces and sells 50 000 units in a year. It takes 0.5 hours to make a unit. If the new arrangement is entered into, manufacturing fixed costs will decrease by 20%.RequiredAdvise the financial director of Bonmache Ltd whether or not the new arrangement should beentered into, by applying the methodology of relevant costing.

Total Cost under existing arrangement is R8,350,000.

Answered: Question 1 Study the scenario and…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 47P: (Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30...

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Question 1
Study the scenario and complete the questions that follow:
Bonmarche Ltd
Bonmarche Ltd produces trophies and other memorabilia. Its financial director is always on the lookout
for new opportunities.
Bonmarche Ltd incurs the following costs:

Description	Rand value
Direct material	R100 per unit
Direct labour	R50 per hour
Variable overheads	R20 per unit
Manufacturing fixed cost	R500000 in total
Company fixed cost	R600000 in total

Additional notes:
 A new opportunity has arisen whereby Bonmarche Ltd can buy 50% of its production units from an
independent supplier at R180 per unit.
 Bonmarche Ltd produces and sells 50 000 units in a year.
 It takes 0.5 hours to make a unit.
 If the new arrangement is entered into, manufacturing fixed costs will decrease by 20%.
Required
Advise the financial director of Bonmache Ltd whether or not the new arrangement should be
entered into, by applying the methodology of relevant costing.

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