logo

Chapter 11 Problem 18 Solution Analysis

   

Added on  2019-09-23

1 Pages214 Words409 Views
 | 
 | 
 | 
Chapter 11 problem 18:Solution 1: BSale price of special order per pair= $6Variable manufacturing cost per pair= $4.5Contribution per pair= sale price – variable manufacturing cost = $6 - $4.5 = $1.5Total contribution from 20000 pairs= $1.5 x 20000 = $30000If special order will be accepted:Operating income will increase by $30000Solution 2: BRelevant cost for manufacturing part no.498 for 20000 units:Direct material= $6 x 20000 = $120000Direct manufacturing labour= $30 x 20000 = $600000Variable manufacturing overhead= $12 x 20000 = $240000Avoidable fixed overhead= $9 x 20000 = $180000Total relevant manufacturing cost = $120000+$600000+$240000+$180000= $1140000Overall saving required= $25000Total cost of buying part no.498= $60 x 20000 = $1200000Amount of relevant cost that would have to be saved by released facilities:= total buying cost – (total relevant manufacturing cost - saving required)= $1200000 – ($1140000 - $25000)= $1200000 - $1115000=$85000
Chapter 11 Problem 18 Solution Analysis_1

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Management Accounting: Costing, Break Even, Overhead Rates, Journal Entries
|16
|1670
|424

Should the Playdough Company Accept or Reject the Special Order?
|8
|1747
|194

Should the Company Accept the Special Order?
|7
|1263
|121

Profit Maximization for the Playdough Company
|8
|1664
|183

Unit 5 Management Accounting - Management Accounting Principles
|15
|772
|28

Solved assignments and essays for Faculty of Business, Law & Tourism - Desklib
|11
|1723
|139