You signed a contract with Matt company to purchase 200 kg of fresh apples every month...
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You signed a contract with Matt company to purchase 200 kg of fresh apples every month for BD1 per kg. Each kg of apple can produce 1 pan of apple pie. Direct labour and overhead to make an apple pie are BD1.5. You normally sell the apple pie at BD5 per plate. However, due to intense competition, the market price now falls to only BD2.5. You are considering stopping the production. Terminating the contract requires you to notify Matt Co within 3 months, otherwise, you have to pay penalties of BD500 per month for the next three months. 6/6 Required: Calculate the amount of provision that will appear on your financial statement at the end of the year. You signed a contract with Matt company to purchase 200 kg of fresh apples every month for BD1 per kg. Each kg of apple can produce 1 pan of apple pie. Direct labour and overhead to make an apple pie are BD1.5. You normally sell the apple pie at BD5 per plate. However, due to intense competition, the market price now falls to only BD2.5. You are considering stopping the production. Terminating the contract requires you to notify Matt Co within 3 months, otherwise, you have to pay penalties of BD500 per month for the next three months. 6/6 Required: Calculate the amount of provision that will appear on your financial statement at the end of the year.
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Cost of apples 200 kg x BD1 BD200 Direct labour and overhead 200 kg x BD15 BD300 Total ... View the full answer
Related Book For
College Accounting Chapters 1-30
ISBN: 978-0077862398
14th edition
Authors: John Price, M. David Haddock, Michael Farina
Posted Date:
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