QUESTION 2: a) Define the following i. Deferential costs. ii. Opportunity costs. iii. Imputed costs b)...

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QUESTION 2: a) Define the following i. Deferential costs. ii. Opportunity costs. iii. Imputed costs b) Standard costs and other date for two component parts used by General Manufactures are presented below PART-A PART-B DIRECT MATERIALS (RS.) 0.40 8.00 DIRECT LABOUR (RS.) 1.00 4.70 FACTORY OVERHEAD (RS.) 4.00 2.00 STANDARD COST PER UNIT (RS.) 5.40 14.70 PER YEAR REQUIREMENT (UNIT 6,000 8,000 MACHINE HOUR PER (UNIT) 4 hours 2 hours UNIT COST IF PURCHASED 5 15 In past year, General Manufacturer has manufactured all of its required components; however, in the current year only 30,000 hours of otherwise idle machine time can be devoted to component production. Accordingly, some of the pars must be purchased from outside suppliers. In producing parts, factory overhead is applied at Rs.60 per standard machine hour. The fixed capacity cost, which will not be affected by any make-or-buy decision, represents 60% of the applied factory overhead. Required: I. The relevant unit production cost to be considered in the make-or buy decision to schedule machine time. II. Potential cost saving per machine hour. III. The units of Product A and B that General Manufacturer should produce if the allocation of machine time is based on potential cost saving per machine hour. (20 Marks) QUESTION 2: a) Define the following i. Deferential costs. ii. Opportunity costs. iii. Imputed costs b) Standard costs and other date for two component parts used by General Manufactures are presented below PART-A PART-B DIRECT MATERIALS (RS.) 0.40 8.00 DIRECT LABOUR (RS.) 1.00 4.70 FACTORY OVERHEAD (RS.) 4.00 2.00 STANDARD COST PER UNIT (RS.) 5.40 14.70 PER YEAR REQUIREMENT (UNIT 6,000 8,000 MACHINE HOUR PER (UNIT) 4 hours 2 hours UNIT COST IF PURCHASED 5 15 In past year, General Manufacturer has manufactured all of its required components; however, in the current year only 30,000 hours of otherwise idle machine time can be devoted to component production. Accordingly, some of the pars must be purchased from outside suppliers. In producing parts, factory overhead is applied at Rs.60 per standard machine hour. The fixed capacity cost, which will not be affected by any make-or-buy decision, represents 60% of the applied factory overhead. Required: I. The relevant unit production cost to be considered in the make-or buy decision to schedule machine time. II. Potential cost saving per machine hour. III. The units of Product A and B that General Manufacturer should produce if the allocation of machine time is based on potential cost saving per machine hour. (20 Marks)