Question
As a result of an expansion programme, Pidilite Industries has excess capacity which is expected to be absorbed by the domestic market in a few
As a result of an expansion programme, Pidilite Industries has excess capacity which is expected to be absorbed by the domestic market in a few years. Two hundred and fifty thousand machine hours are available for the next year. It has received inquiries from two firms located abroad. One offers to buy 2,000,000 units of product A at Rs.3.80 per unit, the second offers to buy 5,000,000 units of product B at Rs.5.00 per unit. Standard costs for these products are given below:
Items of cost
Material Labour
Overhead
Total
Product A
Product B
$1.20
$1.30
50.60
50.80
$0.12
50.16
$1.92
$2.26
Machine hrs
Required per unit 2 3
Overhead is applied on a Machine-hour basis at the rate of Rs. 2 per hour. Seventy five percent of the overhead is estimated to be fixed. No selling and administrative expenses would be allocated to either order, charges are to be paid by the buyer. One of the orders will be accepted. 1. Which should it be? Why?
2. As a consultant to Pidilite what would be your role in advising the management in sustainability accounting?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started