Healthy-Tech Ltd is a health company involved in manufacturing Oximeter products to measure and monitor oxygen...

 

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Healthy-Tech Ltd is a health company involved in manufacturing Oximeter products to measure and monitor oxygen levels. The following represents the cost of producing and selling one Oximeter device at the company's normal activity level of 40,000 units per month. Normal Selling price Direct Materials Direct Labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling & administrative expenses Fixed selling & administrative expenses £/ unit 81.10 38.80 9.70 2.30 18.10 1.70 8.80 Healthy-Tech Ltd received an offer from an overseas customer for 3,000 units of the Oximeters to be delivered this month at a £75.30 special price. Healthy-Tech has an idle capacity that can be used to supply this order and would not affect normal sales. The management of Healthy-Tech Ltd believes that accepting special orders would result in a reduction to the variable selling and administrative expense by £0.20 per unit on this when compared to normal sales. Required: 1. Applying the relevant information for decision making concepts, Should Healthy- Tech Ltd accept the special order? and what is the net effect on the monthly income of Healthy-Tech Ltd if the offer is accepted? 2. Assume that Healthy-Tech Ltd does not have idle capacity to satisfy the special order and accepting the special order would require cutting back production for the local market by 3,000 units. Should Healthy-Tech Ltd accept the offer from the overseas customer? and what is the net effect on the monthly income of Healthy-Tech Ltd if the offer is accepted? You are required to show all your workings Healthy-Tech Ltd is a health company involved in manufacturing Oximeter products to measure and monitor oxygen levels. The following represents the cost of producing and selling one Oximeter device at the company's normal activity level of 40,000 units per month. Normal Selling price Direct Materials Direct Labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling & administrative expenses Fixed selling & administrative expenses £/ unit 81.10 38.80 9.70 2.30 18.10 1.70 8.80 Healthy-Tech Ltd received an offer from an overseas customer for 3,000 units of the Oximeters to be delivered this month at a £75.30 special price. Healthy-Tech has an idle capacity that can be used to supply this order and would not affect normal sales. The management of Healthy-Tech Ltd believes that accepting special orders would result in a reduction to the variable selling and administrative expense by £0.20 per unit on this when compared to normal sales. Required: 1. Applying the relevant information for decision making concepts, Should Healthy- Tech Ltd accept the special order? and what is the net effect on the monthly income of Healthy-Tech Ltd if the offer is accepted? 2. Assume that Healthy-Tech Ltd does not have idle capacity to satisfy the special order and accepting the special order would require cutting back production for the local market by 3,000 units. Should Healthy-Tech Ltd accept the offer from the overseas customer? and what is the net effect on the monthly income of Healthy-Tech Ltd if the offer is accepted? You are required to show all your workings

Answer rating: 100% (QA)

Answer 1 Accepting Special Order Particular Selling Price Less Direct Material Direct Labour V... View the full answer