Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

David Wong, the product manager of KiKi Company, was reviewing the production schedule for the last quarter of 2020. He noted that the company planned

David Wong, the product manager of KiKi Company, was reviewing the production schedule for the last quarter of 2020. He noted that the company planned to sell 4,000 units during the year and keep a minimum closing inventory level at 100 units on 31 December 2020. As at 30 September 2020, the following data was reported.

Units

Inventory, 1 January 2020 0

Production 3,000

Sales 2,700

Inventory, 30 September 2020 300

At the beginning of the year, the company rented a warehouse that could store its inventory up to 1,250 units. The company had a maximum production capacity of 2,300 units per quarter.

Required:

(a) Assume that KiKi Company adopted marginal costing, (i) what is the minimum units that the company should produce during the last quarter of 2020?

(ii) will the number of units produced affect the companys profit or loss for the year? Explain.

(b) Assume that the company adopted absorption costing and David was given an annual bonus based on the companys reported profit. If David wanted to maximize his bonus in 2020, how many units would he produce? Explain.

(c) Advise the management of the company on the costing method that should be chosen to determine Davids bonus?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Law And Economics Of Patent Damages, Antitrust, And Legal Process

Authors: James Langenfeld, Frank Fagan, Samuel Clark

2nd Edition

1800710259, 9781800710252

More Books

Students also viewed these Accounting questions

Question

Contrast Plato with Aristotle in their approaches to knowledge.

Answered: 1 week ago