=+Since this situation appeared to be a litde unusual, William Kenton, manager of the Northern division, discussed
Question:
=+Since this situation appeared to be a litde unusual, William Kenton, manager of the Northern division, discussed the wide discrepancy of bids with Birch's commercial vice-president. He told the vice-president: 'We seIl in a very competitive market, where higher costs cannot be passed on. How can we be expected to showadecent profit and return on investment if we have to buy our supplies at more than 10% over the going market?'
Knowing that Mr Brunner had on occasion in the past few months been unable to operate the Thompson division at capacity , it seemed odd to the vice-president that Mr Brunner would add the full 20% overhead and profit charge to his out-of-pocket costs.
When asked about this, Mr Brunner's answer was the statement that appears at the beginning of this case. He went on to say that having done the developmental work on the box, and having received no profit on that, he feIt entided to a good mark-up on the production of the box itself.
Step by Step Answer:
Accounting For Management Control
ISBN: 9780412374807
2nd Edition
Authors: David Otley And Kenneth Merchant Clive Emmanuel