Crimson Electronics, a company specializing in manufacturing smartphones, reports the following financials for the year ended...
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Crimson Electronics, a company specializing in manufacturing smartphones, reports the following financials for the year ended 31 December 2022. Sales for the year: (8,000 units at $200 each) Direct materials cost: (8,000 units x $40 per unit) Direct labour cost: (8,000 units x $25 per unit) Variable overhead expenses: (8,000 units x $10 per unit) Fixed costs: $1,600,000 $320,000 $200,000 $80,000 $400,000 The anticipated cost increases for 2023: Direct materials by 5%, direct labour by 10%, variable overheads by 8%, and no change in fixed overheads at full capacity. Crimson Electronics has received an overseas order for 4,000 units of the Crimson X1 smartphone at a price $100 to be supplied during 2023. The company must decide whether to accept the entire foreign order. Required: (a) (b) Calculate the full cost of a smart phone for 2022. (4 marks) Assuming the company has available capacity to produce 4,000 units, determine the relevant costs for making the special order. (4 marks) (c) Given your calculations in (b) above determine whether this special order is profitable for the company. (4 marks) (d) Find the opportunity cost of accepting special order, if the company is already operating at full capacity. (e) Explain the potential consequences of selling a product at a price below its full manufacturing cost in the long term. Total marks (20 marks) (4 marks) (4 marks) Crimson Electronics, a company specializing in manufacturing smartphones, reports the following financials for the year ended 31 December 2022. Sales for the year: (8,000 units at $200 each) Direct materials cost: (8,000 units x $40 per unit) Direct labour cost: (8,000 units x $25 per unit) Variable overhead expenses: (8,000 units x $10 per unit) Fixed costs: $1,600,000 $320,000 $200,000 $80,000 $400,000 The anticipated cost increases for 2023: Direct materials by 5%, direct labour by 10%, variable overheads by 8%, and no change in fixed overheads at full capacity. Crimson Electronics has received an overseas order for 4,000 units of the Crimson X1 smartphone at a price $100 to be supplied during 2023. The company must decide whether to accept the entire foreign order. Required: (a) (b) Calculate the full cost of a smart phone for 2022. (4 marks) Assuming the company has available capacity to produce 4,000 units, determine the relevant costs for making the special order. (4 marks) (c) Given your calculations in (b) above determine whether this special order is profitable for the company. (4 marks) (d) Find the opportunity cost of accepting special order, if the company is already operating at full capacity. (e) Explain the potential consequences of selling a product at a price below its full manufacturing cost in the long term. Total marks (20 marks) (4 marks) (4 marks)
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Answer a The full cost of a smartphone for 2022 can be calculated as follows Total Cost Direct mater... View the full answer
Related Book For
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen
Posted Date:
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