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QUESTION 3 (25 MARKS) A. Stark Engines Sdn. Bhd. Manufactures a variety of engines for use in heavy equipment. The company has always produced all

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QUESTION 3 (25 MARKS) A. Stark Engines Sdn. Bhd. Manufactures a variety of engines for use in heavy equipment. The company has always produced all the necessary parts of its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Stark Engines Sdn. Bhd. for a cost of RM3S per unit. To evaluate this offer, Stark Engines Sdn. Bhd. Has gathered Fixed manufacturing overhead, traceable consist of one-third supervisory salaries and two-thirds depreciation of special equipment with no resale value. Required: a. Assuming that the company has no alternative use for the facilities that are now being used to produce the carburetors, should the outside supplier's offer be accepted? Show all computations. ( 8 marks) FBA/PAS1373/APRIL19 b. Suppose that if the carburetors were purchased, Stark Engines Sdn. Bhd. Could use the freed capacity to lunch a new product. The operating profit margin of new product would be RM150,000 per year) Should Stark Engines Sdn. Bhi. Accept the offer to buy the carburetors for RM35 per unit? Show all computations. (7 marks) Exe Limited is a successful business that makes a single product, known a D-20D. The company regularly uses one type of material which is purchased at RM1.20 per kilo. The annual demand is 128,000 kilograms and sufficient storage space is available to accommodate order size up to 8,000 kilograms. The cost of holding stock is RM0.18 and the cost of placing an order is RM11.25. a. Using FOUR (4) order sizes options of 3,200, 4,000, 6,400 and 8,000 kilograms per order, prepare a schedule showing the number of order per annum, average stock in kilo, annual cost of holding stock and annual cost of ordering. ( 8 marks) D. Calculate the Economic Order Quantity (EOQ). (2 marks)

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