Qorvo Bhd has three departments to manufacture chips, diodes and transistors. Each of these department has...
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Qorvo Bhd has three departments to manufacture chips, diodes and transistors. Each of these department has a production capacity of 40,000 units per month. Recently, the company experienced an overstocking of chips due to low demand. Analyst forecasts the low demand in semiconductor industry to be temporary dan demand will increase after four months. Therefore, management decides to reduce the production of chips next month to be at 25,000 units at a selling price of RM50 per chip. The expected revenues and costs for next month's production are: Total (RM) Per unit (RM) Sales Direct labours 1,250,000 50 375,000 15 Direct materials 250,000 10 Variable manufacturing overhead costs 100,000 4 Manufacturing non-variable overheads 175,000 7 Marketing and distribution costs 125,000 5 Total costs Profit 1,025,000 33 225,000 7 One of the companies in medical device industry, Boston Scientific (M) Sdn Bhd has offered to buy 5,000 chips for the coming four months at a price of RM25 per chip. Boston Scientific requires a pentagon-cutting which will increase design cost by RM0.25 per chip. There will be no additional marketing and distribution cost because Boston Scientific will collect the chips from Qorvo Bhd's warehouse. 1. Revise revenues and costs on a total and per unit basis, if Qorvo Bhd accepts the order. (10 marks) 2. Weigh the two alteratives between accepting and rejecting the special order. Recommend the best alterative. (10 marks) 3. Explain two qualitative factors to be taken into consideration before Qorvo Bhd accepts the order. Qorvo Bhd has three departments to manufacture chips, diodes and transistors. Each of these department has a production capacity of 40,000 units per month. Recently, the company experienced an overstocking of chips due to low demand. Analyst forecasts the low demand in semiconductor industry to be temporary dan demand will increase after four months. Therefore, management decides to reduce the production of chips next month to be at 25,000 units at a selling price of RM50 per chip. The expected revenues and costs for next month's production are: Total (RM) Per unit (RM) Sales Direct labours 1,250,000 50 375,000 15 Direct materials 250,000 10 Variable manufacturing overhead costs 100,000 4 Manufacturing non-variable overheads 175,000 7 Marketing and distribution costs 125,000 5 Total costs Profit 1,025,000 33 225,000 7 One of the companies in medical device industry, Boston Scientific (M) Sdn Bhd has offered to buy 5,000 chips for the coming four months at a price of RM25 per chip. Boston Scientific requires a pentagon-cutting which will increase design cost by RM0.25 per chip. There will be no additional marketing and distribution cost because Boston Scientific will collect the chips from Qorvo Bhd's warehouse. 1. Revise revenues and costs on a total and per unit basis, if Qorvo Bhd accepts the order. (10 marks) 2. Weigh the two alteratives between accepting and rejecting the special order. Recommend the best alterative. (10 marks) 3. Explain two qualitative factors to be taken into consideration before Qorvo Bhd accepts the order.
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Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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