Test 1 ACCT 3122 Fall 2020 Question 2 (20 Marks) (a) Ahmed Manufacturing LLC is considering using stocks of an old raw material in a special project. The special project would require all 220 kilograms of the raw material that are in stock and that originally cost the company OMR1,804 in total. If the company were to buy new supplies of this raw material on the open market, it would cost OMR8.55 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of OMR5.75 per kilogram i it were not used in the special project. The sale of the ran material would involve delivery to the purchaser at a total cost of OMR9.70 for all 220 kilograms Calculate the relevant costs of the 220 kilograms of the raw material when deciding whether (6 marks) to proceed with the special project, and Explain why you consider such costs as relevant to the decision (b) Ahmed Manufacturing LLC is a specialty component manufacturer with idle capacity. Management would like to use its extra capacity to generate additional profits. A potential customer has offered to buy 9.500 units of component Y. Each unit of Y requires 6 units of material X and 4 units of material 2. Data conceming these two materials follow Material Units in Stock Original Cost/Unt Current market Pricelunit Disposal Valuelunit X 5,740 OMR4.80 OMR5 25 OMR5.15 Z 39,620 OMR5.50 OMR5.35 OMR4.35 Material X is in use in many of the company's products and is routinely re-stock. Material is no longer used by the company in any of its normal products and existing stocks would not be re-stock once they are used up What would be the relevant cost of the materials, in total, for purposes of determining the 7 marks) minimum acceptable price for the order for component Y? (c) The management of Ahmed Manufacturing LLC is considering dropping product RC. Data from the company's accounting system appear below: Sales OMR180.000 Variable Costs OMR56 000 Fixed manufacturing Costs OMR49.000 Fixed Selling and Administrative Costs OMR35,000 In the company's accounting system, all fixed expenses are fully allocated to products. Further investigation has revealed that OMR43,000 of the fixed manufacturing expenses and OMR25,000 of the fixed selling and administrative expenses are avoidable if product RC is discontinued. What would be the effect on the company's overall net operating income if product RC were (7 Marks) dropped