An electronics company produces many types of expensive components. A recent contract for a batch of...

      
 

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An electronics company produces many types of expensive components. A recent contract for a batch of components (KRS) was priced by the company's accountant. Although the company is short of work, the accountant has advised the managing director that the contract should not be accepted because it will result in a loss, as follows: Contract KRS Contract price Less: Materials K 65,000 K 100,000 Labour Depreciation Variable overheads Fixed overhead allocation Loss REQUIRED: Selling price The following additional information is available: K10,000 of material, for which there is no other use, is already in stock. If the contract does not g ahead, it will be disposed of at a cost of K1,000. A contract has been agreed for K5,000 worth of stock. The balance of the stock will also need to be purchased. Direct materials Labour costs include an allocation of supervisor's costs of K20,000. If the contract is not accepted, some of the workforce will be made redundant at a cost of K10,000. Direct labour It has just been realized that the machinery for the contract needs some modification at a cost of K3,000. If the machinery is not used in the contract it will be sold for K5,000. The contract will take 3,600 direct labour hours. K 100 49,000 (a) Should the contract be accepted or rejected? Justify your inclusion or exclusion of costs and state what other factors should be taken into account. (b) Before a final decision is made, the company receives a new order for its productions. The following information is available: Per unit 45 10,000 20 6,000 20,000 10 150,000 15 50,000 Allocated fixed costs Variable cost To make one unit takes five labour hours. The company does not have the labour hours available to complete contract KRS and accept the new order. Should contract KRS or the new order be accepted? Explain your reasons and give supporting figures. C. Decision making is not concerned solely with costs and revenues.' Give some examples of non- financial considerations that may be taken into account when making various types of decision. An electronics company produces many types of expensive components. A recent contract for a batch of components (KRS) was priced by the company's accountant. Although the company is short of work, the accountant has advised the managing director that the contract should not be accepted because it will result in a loss, as follows: Contract KRS Contract price Less: Materials K 65,000 K 100,000 Labour Depreciation Variable overheads Fixed overhead allocation Loss REQUIRED: Selling price The following additional information is available: K10,000 of material, for which there is no other use, is already in stock. If the contract does not g ahead, it will be disposed of at a cost of K1,000. A contract has been agreed for K5,000 worth of stock. The balance of the stock will also need to be purchased. Direct materials Labour costs include an allocation of supervisor's costs of K20,000. If the contract is not accepted, some of the workforce will be made redundant at a cost of K10,000. Direct labour It has just been realized that the machinery for the contract needs some modification at a cost of K3,000. If the machinery is not used in the contract it will be sold for K5,000. The contract will take 3,600 direct labour hours. K 100 49,000 (a) Should the contract be accepted or rejected? Justify your inclusion or exclusion of costs and state what other factors should be taken into account. (b) Before a final decision is made, the company receives a new order for its productions. The following information is available: Per unit 45 10,000 20 6,000 20,000 10 150,000 15 50,000 Allocated fixed costs Variable cost To make one unit takes five labour hours. The company does not have the labour hours available to complete contract KRS and accept the new order. Should contract KRS or the new order be accepted? Explain your reasons and give supporting figures. C. Decision making is not concerned solely with costs and revenues.' Give some examples of non- financial considerations that may be taken into account when making various types of decision. An electronics company produces many types of expensive components. A recent contract for a batch of components (KRS) was priced by the company's accountant. Although the company is short of work, the accountant has advised the managing director that the contract should not be accepted because it will result in a loss, as follows: Contract KRS Contract price Less: Materials K 65,000 K 100,000 Labour Depreciation Variable overheads Fixed overhead allocation Loss REQUIRED: Selling price The following additional information is available: K10,000 of material, for which there is no other use, is already in stock. If the contract does not g ahead, it will be disposed of at a cost of K1,000. A contract has been agreed for K5,000 worth of stock. The balance of the stock will also need to be purchased. Direct materials Labour costs include an allocation of supervisor's costs of K20,000. If the contract is not accepted, some of the workforce will be made redundant at a cost of K10,000. Direct labour It has just been realized that the machinery for the contract needs some modification at a cost of K3,000. If the machinery is not used in the contract it will be sold for K5,000. The contract will take 3,600 direct labour hours. K 100 49,000 (a) Should the contract be accepted or rejected? Justify your inclusion or exclusion of costs and state what other factors should be taken into account. (b) Before a final decision is made, the company receives a new order for its productions. The following information is available: Per unit 45 10,000 20 6,000 20,000 10 150,000 15 50,000 Allocated fixed costs Variable cost To make one unit takes five labour hours. The company does not have the labour hours available to complete contract KRS and accept the new order. Should contract KRS or the new order be accepted? Explain your reasons and give supporting figures. C. Decision making is not concerned solely with costs and revenues.' Give some examples of non- financial considerations that may be taken into account when making various types of decision. An electronics company produces many types of expensive components. A recent contract for a batch of components (KRS) was priced by the company's accountant. Although the company is short of work, the accountant has advised the managing director that the contract should not be accepted because it will result in a loss, as follows: Contract KRS Contract price Less: Materials K 65,000 K 100,000 Labour Depreciation Variable overheads Fixed overhead allocation Loss REQUIRED: Selling price The following additional information is available: K10,000 of material, for which there is no other use, is already in stock. If the contract does not g ahead, it will be disposed of at a cost of K1,000. A contract has been agreed for K5,000 worth of stock. The balance of the stock will also need to be purchased. Direct materials Labour costs include an allocation of supervisor's costs of K20,000. If the contract is not accepted, some of the workforce will be made redundant at a cost of K10,000. Direct labour It has just been realized that the machinery for the contract needs some modification at a cost of K3,000. If the machinery is not used in the contract it will be sold for K5,000. The contract will take 3,600 direct labour hours. K 100 49,000 (a) Should the contract be accepted or rejected? Justify your inclusion or exclusion of costs and state what other factors should be taken into account. (b) Before a final decision is made, the company receives a new order for its productions. The following information is available: Per unit 45 10,000 20 6,000 20,000 10 150,000 15 50,000 Allocated fixed costs Variable cost To make one unit takes five labour hours. The company does not have the labour hours available to complete contract KRS and accept the new order. Should contract KRS or the new order be accepted? Explain your reasons and give supporting figures. C. Decision making is not concerned solely with costs and revenues.' Give some examples of non- financial considerations that may be taken into account when making various types of decision.