Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi, could someone answer the questions and show the working please Heath Production manufactures chairs. Several weeks ago, the company received an enquiry from Rose

Hi, could someone answer the questions and show the working please

image text in transcribed
Heath Production manufactures chairs. Several weeks ago, the company received an enquiry from Rose Limited. Rose wants to market a foldable chair similar to one of mg has offered to purchase 11 000 units if the offer can be completed in three months. The cost data for Heath's foldable chair is as follow: Direct material ' $15.40 Direct labour {0.125 9 $36 per hour] ' 4.50 Total manufacturing overhead 20.00 The normal selling price of Heath's foldable chair is $53.00. However, Rose has offered Heath only $31.50 because of the large quantity it is willing to purchase. Rose requires a modification of the design that will allow a $4.20 reduction in direct material cost. The production manager of Heath notes that the company will incur $7400 in additional setup costs and will have to purchase a $4800 special equipment to manufacturing the units for Rose. The equipment will be discarded once the special order is completed. Total manufacturing overhead costs are applied to production at the rate of $40 per machine hour. The figure is based, in part, on budgeted annual fixed overhead of $1 500 000 and planned production activity of 60 000 machine hours (5000 hours per month). Rose will allocate $3600 of existing fixed administrative costs to the order as \"part of the cost of doing business\". Required: a) Which of the data above should be ignored in making the gm decision? For what reason? (1 mark} h} Assume that Heath's present sales will not be affected by the special order, should the order be accepted from the financial point of view? Show calculation. (4 marks) c) Assume that Heath's current production activity 80 per cent of planned machine hours, can the company accept the order and meet Rose's deadline? Explain. (2 marks)

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

International Marketing And Export Management

Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr

8th Edition

1292016922, 978-1292016924

Students also viewed these Accounting questions

Question

How is a standardized residual different from a residual?

Answered: 1 week ago