BKAM$3023$ MANAGEMENT ACCOUNTING II

QUESTION $4(20$ MARKS: $36$ MINUTES$)$

A$.$ Tenteram Sdn$.$ Bhd$.($TSB$)$ produces two $(2)$ types of chairs: Standard Chair and Executive Chair. The following information related to both products $($per unit$)$ is as follows:

$\backslash$table$[[,$Standard Chair,Executive Chair$],[$Materials$,6$ kgs$,10$ kgs$],[$Labor$,10$ hours,$12$ hours$],[$Selling Price,RM$80,$RM$100],[$Variable Costs,RM$56,$RM$70],[$Maximum Demand $($units$),20,10]]$

Fixed costs are RM$200$ per week. There is a maximum of $160$ kgs of materials and $360$ labor hours available for the coming week.

REQUIRED:

$($a$)$ Identify the scarce resource needed by TSB$.$ Show all workings.

$(2$ Marks$)$

$($b$)$ Determine the contribution margin per unit of constraint resource and rank the production priority for each product.

$(5$ Marks$)$

$($c$)$ Calculate the units of Standard Chair and Executive Chair that should be produced by TSB$.$

$(3$ Marks$)$

$($d$)$ Calculate the maximum profit based on your answer in $($c$).$

$(3$ Marks$)$

B$.$ Johan Sdn$.$ Bhd$.($JSB$)$ produces a single type of product. The cost of producing and selling a single unit of this product at the company's normal activity level of $60,000$ units per month are as follows:

$\backslash$table$[[$Direct Materials,RM$],[$Direct Labor,$34\mathrm{.}00],[$Variable Manufacturing Overhead,$4\mathrm{.}00],[$Fixed Manufacturing Overhead,$2\mathrm{.}00],[$Variable Selling and Administrative Expense,$21\mathrm{.}30],[$Fixed Selling and Administrative Expense,$2\mathrm{.}70]]$

$7$

BKAM$3023$ MANAGEMENT ACCOUNTING II

The normal selling price of the product is RM$79\mathrm{.}80$ per unit. An order has been received from an overseas customer for $2,000$ units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be RM$0\mathrm{.}30$ less per unit on this order than on normal sales.

REQUIRED:

$($a$)$ Assess the impact of accepting the special order at a discounted price of RM$71\mathrm{.}60$ on JSB$\text{'}$s net operating income, assuming that JSB is having ample idle capacity.

$($b$)$ Determine the opportunity cost per unit of receiving the special order from the overseas customer, assuming that JSB is operating at full capacity.

$(1$ Mark$)$

$($c$)$ Recommend the minimum acceptable price per unit for the special order if JSB decides to reduce production of $700$ units for regular customers in order to fulfill the demand from overseas customers.

$(3$ Marks$)$