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T217 ACC202 MANAGEMENT ACCOUNTING ASSIGNMENT
Solution (A): Cost per unit of producing the canisters under the traditional approachStatement to calculate the total cost of producing 760000 canisters under traditionalapproachParticularsAmountAdd: Direct materials\$300,000.00 Add: Direct labour\$180,000.00 Add: Variable overhead\$120,000.00 Total Variable cost\$600,000.00 Add: Fixed Overhead\$540,000.00 Total Cost for 760000 units\$1,140,000.00Number of Units760000Cost per unit\$1.50 (Walton, 2000)Solution (B): Should the company purchase the canisters or continue manufacturing themHere we have to calculate per unit cost of canister without adding the unavoidable fixedcost.Calculation of Avoidable fixed costSupervisors salaries\$80,000.00 Machinery depreciation\$28,000.00 \$
108,000.00 Cost of per unit of producing the canisters without including the fixed costParticularsAmountAdd: Direct materials\$300,000.00 Add: Direct labour\$180,000.00 Add: Variable overhead\$120,000.00 Total Variable cost\$600,000.00 Add: Avoidable Fixed Overhead\$108,000.00 Total Cost for 760000 units\$708,000.00 Number of Units760000Cost per unit\$0.93 (Bierman and Smidt, 2007)Cost of purchasing from the Canister company\$1.00 So it can be said that company must manufacture in house due to cost of manufacturing is much lessthan the purchasing cost (Besley and Brigham, 2008).Solution (C): In order to accept the offer it is essential to check the relevantRelevant cost of producing 1 unit of canister\$0.93 Offer price received for 1 canister \$1.40 Profit per canister\$0.47 It is advised to the company to accept the offer if company has extra capacity and there is furtherdemand in the market (Bull, 2007).

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