Business Accounting - Question Answers

Vilar Ltd is considering eliminating Model XP from its motorbikes line because of loses over the past quarter. The past three months of information for Model XP are summarised below:

Sales (832 units): $254,845

Manufacturing costs:

Direct materials: $157,006

Direct labour: $60,005

Overhead: $83,109

Overhead costs are 53% variable and all the rest are fixed costs (depreciation of special equipment for Model XP that has no resale value).

What is the minimum price (rounded using two decimals) Vilar should sell Model XP to do not drop this product from the product line? (157,006 + $60,005 +$83,109 x 0.53)/832

Budget refrigerators Ltd currently manufactures different sizes of refrigerators. An outside supplier has offered to supply all of the needed compressors for the refrigerators. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the compressors:

Direct materials                               $34

Direct labour                                   $36

Unit-related support costs                $34

Batch-related support costs             $30

Product-sustaining support costs       $44

Facility-sustaining support costs       $39

The relevant cost per compressor is: Add all costs

Quality Sheds Ltd is approached by Mr Carlos Toro, a new customer, to fulfill a large one-time-only special order for a shed similar to those offered to regular customers. The following per unit data apply for sales and installation of a shed to regular customers:

Direct materials                            $371

Direct labour                                $578

Variable manufacturing support   $153

Fixed manufacturing support       $174

Markup                                         42%

Quality Sheds has excess capacity. Mr Toro wants the sheds with a modification that will increase its direct materials costs by $95 per unit.

For Quality Sheds Ltd, what is the minimum acceptable price of this one-time-only special order (rounded to the nearest integer)? 371 + 578 + 153 + 95 

A relevant cost is a cost that is a (n):

Employee morale at Dos Santos, Inc., is very high. This type of information is known as a:

Vilar Ltd is considering eliminating Model XP from its motorbikes line because of loses over the past quarter. The past three months of information for Model XP are summarised below:

Sales (1,129 units): $249,721

Manufacturing costs:

Direct materials: $151,751

Direct labour: $64,901

Overhead: $83,628

Overhead costs are 61% variable and all the rest are fixed costs (depreciation of special equipment for Model XP that has no resale value).

Calculate the increase/(-)decrease in operating income (rounded using two decimals) if Model XP is dropped from the product line.

($151,751 + $64,901 +  $83,628 x 0.61) – 249,721