AMA

AMA

naer Question 14.Slad, bad nearly completed a job relating to construction of a specialised When he discovered that the customer had gone out of business. At this stage the Doc job was as under: Original cost estimate Cosa incurred so far Costs to be incurred Progress payments received from Original customer 1,75.200 1.48,500 29,700 / 200.000 Aher searches, a new customer for the equipment has been found. He is interested to take equipment i certain modification is carried out. The new customer wants the equipment original condition but without its control device and with certain other modifications. The of these additions and modifications are estimated as under: Direct materials (at cost) Direct Wages Department Department B 15 man days 25 man days 1,050 1,350 2 Deparus direct was eenety bus Variable overheads 25% of direct wages in each department Delivery costs Fixed overheads will be absorbed at 50% of direct wages in each department The following additional information is available: 1. The direct materials required for the modification are in stock and if not modification of this order, they will be used in another lob in place of materials now cost 2.250. 2. Department A is working normally and hence any engagement of labour paid at dired wage rate of 120 per man day. 3. Department B is extremely busy. Is direct wages rate is currently yielding a contribution of 3.20 per rupee of direct wages. 4. Supervisory Overtime payable for the modification is S. The cost of the control device that the new customer does not require 100 per man- is taken out. It can be used in another job in place of a different mech 1,050. and if not used un place of materials that ent of labour will have to 23.20 person is 00 per man-day and I not rea not require is ? 13,500.11 Merent mechanism. The Late LT CONCEPTS IN DECISION MAN 125 mechanism has otherwise to be bought for 10:500. The dismantling and removal of the control mechanism will take one man day in department A. the modification is not carried out, some of the materials in the original equipment can be used in another contract in place of material that would have cost 12.000. I would huve talentwoman-days of work indepartment to make them suitable for this purpose The remaining materials will realist 11.400 as part of the job. can be sold fort 1.500. The drawings which are included Required To calculate the minimum price, which Sud.can afford to quote for the new customer as stated bove. (CA Finals 2006, ICWA 2000)