ACCT1064 - Cost Analysis and Organisational Decisions
ACCT1064 Cost Analysis and Organisational Decisions
Assessment 1
INSTRUCTIONS TO CANDIDATES
· Duration of the assessment: 24 hours from the start of your scheduled tutorial time
· Group leader to submit your answer booklet via Course Canvas site
· Attempt ALL parts of the question
· Requirements: Form a group [no less than three (3) and no more than four (4) students] to answer these questions.
QUESTION 1
Kajaria is a manufacturing business which makes a product in two models: Model M1 and model M2. Details of the two products are as follows:
|
Particulars |
Model M1 |
Model M2 |
|
Annual sales |
12,000 units |
10,000 units |
|
Number of sales orders |
200 |
125 |
|
Sales price per unit |
$75 |
$70 |
|
Direct material cost per unit |
$9 |
$9 |
|
Direct labour hours per unit |
2 hours |
2.5 hours |
|
Direct labour rate per hour |
$9 |
$9 |
|
Special parts per unit |
15 |
20 |
|
Production batch size |
75 units |
500 units |
|
Set-ups per batch |
5 |
3 |
Other relevant information is as follows:
|
Particulars |
Amount ($) |
Cost driver |
|
Setup costs |
86,000 |
Number of setups |
|
Material handling costs |
54,000 |
Number of batches |
|
Special part handling costs |
57,000 |
Number of special parts |
|
Invoicing |
30,875 |
Number of sales orders |
|
Other overheads |
114,750 |
Direct labour hours |
A customer has indicated an interest in placing a large order for either model M1 or M2 and the sales manager wished to try to sell the higher priced model M1.
Required:
(a) Calculate the profit per unit for each model using activity-based costing.
(b) Identify which product the sales manager should try to sell based on the information provided by your analysis. If there is a loss-making product, then advise the relevant information that the management needs to consider in taking any decision in relation to the loss making product.
(15 + 5 = 20 marks)
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Rating:
/5
Solution: ACCT1064 - Cost Analysis and Organisational Decisions