Maverick Limited expects to manufacture 36 000 units of Product K, using 90% of its normal...

  

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Maverick Limited expects to manufacture 36 000 units of Product K, using 90% of its normal capacity. The costs to manufacture 36 000 units of Product K are as follows: Fixed manufacturing overheads Variable manufacturing overheads Direct materials cost Direct labour cost Variable marketing costs Fixed marketing and administrative costs R 360 000 75 600 259 200 201 600 68 400 640 000 The selling price is R40 per unit. However, a customer has offered to pay R24 per unit for an additional 3 800 units. REQUIRED Study the information provided below and answer the following questions: 5.2.1 Does Maverick Limited have spare capacity to accept the special order? Motivate your answer. 5.2.2 Should the company accept the special order? Show all the relevant calculations. 5.2.3 Explain TWO (2) possible disadvantages to Maverick Limited of accepting the special order. (2 marks) (6 marks) (4 marks) Maverick Limited expects to manufacture 36 000 units of Product K, using 90% of its normal capacity. The costs to manufacture 36 000 units of Product K are as follows: Fixed manufacturing overheads Variable manufacturing overheads Direct materials cost Direct labour cost Variable marketing costs Fixed marketing and administrative costs R 360 000 75 600 259 200 201 600 68 400 640 000 The selling price is R40 per unit. However, a customer has offered to pay R24 per unit for an additional 3 800 units. REQUIRED Study the information provided below and answer the following questions: 5.2.1 Does Maverick Limited have spare capacity to accept the special order? Motivate your answer. 5.2.2 Should the company accept the special order? Show all the relevant calculations. 5.2.3 Explain TWO (2) possible disadvantages to Maverick Limited of accepting the special order. (2 marks) (6 marks) (4 marks)

Answer rating: 100% (QA)

SOLUTION 521 To determine if Maverick Limited has spare capacity to accept the special order we need to compare the production capacity required for t... View the full answer