$5$:$43$

$44$

$1$QUESTIONBANK

Marginal Costing Decision Making

Question $1$

Tony's T$-$shirts makes shirts for local soccer, baseball, basketball, and other sports teams. The owner, Tony, purchases the shirts and prints graphics on the shirts for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Tony sells $1,000$ shirts each month. Typical monthly financial data follow:

$\backslash$table$[[,\backslash$table$[[$Per Unit$],[($GHe$)]],\backslash$table$[[$Total Monthly Data for $1000],[$shirts $($GHC$)]]],[$Sales revenue,$20,20,000],[$Variable Costs:,,$],[$Direct materials,$8,8,000],[$Direct labour,$2,2,000],[$Manufacturing overhead,$3\_,,3,000],[$Total variable costs,$13,13,000],[$Contribution margin,Z$\_,,7,000],[$Fixed costs $($rent$,$ salaries etc$),,4,000],[$Profit$,,3,000]]$

The monthly information provided relates to the company's routine monthly operations. A representative of the local high school recently approached Tony to ask about a one$-$time special order. The high school will be hosting a state wide track and field event and is willing to pay Tony's T$-$shirts GH$17$ per shirt to make $200$ custom T$-$shirts for the event. Because enough idle capacity exists to handle this order, it will not affect other sales. That is$,$ Tony has the factory space and machinery available to produce more T$-$shirts. Tony incurs the same variable costs of GHc$13$ per unit to produce the special order, and he will pay a firm $GH6600$ to design the graphics that will be printed on the shirts. This special order will have no other effect on Tony's monthly fixed costs.

Required.

Sbould Tony accept the special order?

$147$

Question $2$

Jackson Company is now making a small part that is used in one of its products. The company's accounting department reports the following per unit costs of producing the part internally,

uarr

$2$

$($B$)$