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1. With reference to the in-class activities discuss why the marginal costing (CVP) approach is better than full costing approach for short-term decision making. (200
1. With reference to the in-class activities discuss why the marginal costing (CVP) approach is better than full costing approach for short-term decision making. (200 words excluding calculations) Scenario 1 Thanos Itd (TL) Company a medium sized company manufacturing and supplying smart and affordable computing tablets. Costs and price of one tablet are as follows: Selling price 40.00 Direct material 15.00 Direct labour f 5.00 Other variable cost f 7.00 Fixed costs of running the business is 140,000. Budgeted sales for next year is 20,000 units. An overseas distributor, Apex Co, has approached TL with a unique order. They wish to place an order of 8,000 tabs, but at 25% discount on original price. Additional variable cost will be 3 per unit. Although, TL has spare production capacity to fulfil this order, Apex expects their order to be prioritised and to be completed as soon as possible. Requirement: Advise TL whether to accept the one-off contract from Apex. Clearly show your workings. Scenario 2 TL is looking to outsource its accounts department for over six months now. A firm, Creative Accountants (CA) has approached TL and offered to provide the service for 15,000. TL ascertains the following costs are incurred internally: Clerical labour 7,000 Supervisory labour f 6,000 Variable overheads f 3,000 Fixed overheads f 5,000 Required: Advise TL whether to outsource the accounting function. Clearly show your workings Scenario 3 TL's parent company, Bristol-Techs (BT) Ltd, is a large independent supplier and retailer of electronic goods. It has three retails shops operating in Bristol, Gloucester and Bath. The business in general is profit making, although Gloucester branch is currently incurring losses. BT's management is considering to close the branch with immediate effect and open a new branch in London instead. The new branch will take approximately one year to be completed. A summary of next year's budget is given below: Bristol Gloucester Bath Total Sales 100,000 0,000 370,000 Direct material 32,000 45,000 38,000 115,000 Wages and other variable costs 25,000 30,000 22,000 77,000 Fixed costs 30,000 30,000 30,000 90,000 Required: Advise BT's management whether to close the Gloucester branch before the London branch is fully functioning
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