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Should the Company Accept the Offer from Outside Suppliers?

   

Added on  2019-09-16

14 Pages2594 Words364 Views
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Management Accounting
Should the Company Accept the Offer from Outside Suppliers?_1

Introduction In this present paper, we will discuss the monthly profit, factors which are considered at the time of accepting the order, long term government contract offer, foreign market offer, outside suppliers offer, and another outside offer from suppliers.a.Monthly profitThe monthly profit is calculated by deducting the total cost from the total revenue of the company within the particular period of time. The monthly profit determines the total profitability of the company by deducting the total expense of the company with the total sales ofthe company. The manufacturing costs include direct material, direct labor, variable overhead, and fixed overhead (Harvey et al., 2013). The marketing costs include variable and fixed costs. In which the fixed costs does not change by variation in the units produced within the particular period of time. The total pen and pencil set produced in a month are 10,000, and all the units are sold in the same month. The total profit percentage of the company is 6.67% of the total sales of the company which shows that the company is not able to meet the breakeven point. The monthly profit of the company is covering the total cost of the company which includes total variable and total fixed cost within the particular time period. Below table shows the calculations:XParticularCosts UnitAmountSales 7.51000075000Additional sales 5.5200011000Manufacturing
Should the Company Accept the Offer from Outside Suppliers?_2

costsDirect material11200012000Direct labour1.21200014400Variable overhead0.8120009600Fixed overhead--10,000Marketing costsVariable costs1.51200018000Fixed costs--15000Additional costs0.620001200Total cost80200Total sales86000Total profit5800Profit percentage7.73%b.Factors to be considered at the time of accepting the orderThe profit of the company after producing the additional units at 5.50 per unit is $5,800 which shows that the company should accept the request offer because the company is able to meet the total expense of the company by producing additional units of 2000 at 5.50 per unit. So the company should accept the off request based on the profit. Yes, the off request should be accepted based on the profit because the company firstly considers the profit is generating from accepting the off request.
Should the Company Accept the Offer from Outside Suppliers?_3

Other factors are also considered at the time of accepting the projects. Below are the factors:1.Value of the offerIt is one of the most important factors which is considered after the profit of the company. The value added by accepting the project is taken into account. 2.Benefits associated with offerThe benefits are considered at the time of accepting the project such as synergy, competitive advantage and others which helps to build the brand image in the eyes of the customers (Mir et al., 2014). 3.Brand valueIt is considered at the time of accepting the project which improves the brand recognition andidentity. For example, the government contracts are generally accepted at lower profits because the company considered the brand value improvement by accepting the project. 4.Long term profitIt is one of the most important factors which is considered at the time of accepting the projectbecause long term sustainability is impacted by acquiring the project. 5.Termination of project The duration of the project is another factor which is impacted by accepting the project because the short term projects are not deeply analyzed whereas the long-term projects are analyzed in order to determine the impact of accepting the project.Below table shows the calculations:XParticularCosts UnitAmountSales 7.51000075000
Should the Company Accept the Offer from Outside Suppliers?_4

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