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 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. b. The Ministry of Defense Malaysia (MinDef) would like to make a one-time only purchase of 5,000 units of Champs. MinDef would pay a fixed fee of RM1.80 per unit, and it would reimburse Excell Bhd for all cost production (variable and fixed) associated with the units. MinDef would pick up the product with its own trucks, therefore would be no variable selling expenses associated with this order. Advise Excell Bhd whether to accept or reject the order.
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 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. b. The Ministry of Defense Malaysia (MinDef) would like to make a one-time only purchase of 5,000 units of Champs. MinDef would pay a fixed fee of RM1.80 per unit, and it would reimburse Excell Bhd for all cost production (variable and fixed) associated with the units. MinDef would pick up the product with its own trucks, therefore would be no variable selling expenses associated with this order. Advise Excell Bhd whether to accept or reject the order.
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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