Lannister Enterprise business operation focuses on corporate merchandise and provide customization options to their customers. The...

 
 

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Lannister Enterprise business operation focuses on corporate merchandise and provide customization options to their customers. The main product of the business is water goblet. As the business is recovering from economic effect of Covid 19 pandemic, more orders are being received. Production of the water goblet requires skilled labour and semi-skilled labour with two materials of glass and sand. Lannister Enterprise is currently operating at 80% level of capacity producing 110,000 units of water goblet monthly. The following information is provided on production. Sales (110,000 units) Less: Raw materials Sand Glass Labour Skilled (RM5 per hour) Semi-skilled (RM2 per hour) 132,000 264,000 330,000 88,000 275.000 182.000 2,200,000 Production overhead Selling and distribution Net profit For every unit of water goblet production, it uses 100 gram each of sand and glass. The materials of sand and glass was purchased at RM24 and RM12 per kilogram respectively. Variable production overhead consists of 60% of total production overhead and it is absorbed based labour hours. Selling and distribution consist of fixed advertising cost of RM6,000 Additional information: (1,271,000) 929,000 On 28 December 2022, Lannister Enterprise received an online bulk order from Tully Bhd to purchase 25,000 unit of water goblet. They required that each unit of the water goblet to be engraved with a gold colour acrylic ink and packaged in customs container in gold colour. This order will also incur processing cost of RM15,200. However, the customer only has a budget to purchase each unit at RM15. Required: (a) Compute the contribution margin per unit for the water goblet at the current level of production. (b) Based on the special order by Tully Bhd, the gold acrylic ink will cost RM2.50 and custom container will cost RM0.80 per for each unit of water goblet. Analyse whether Lannister Enterprise should accept the order? (c) Tully Bhd would like to increase the order to 30,000 units, and the new processing cost is RM16,700. The cost in 3(b) remain the same. Advise whether Lannister Enterprise should accept the order? (d) Explain what are the relevant cost in decision making and provide ONE (1) example. Lannister Enterprise business operation focuses on corporate merchandise and provide customization options to their customers. The main product of the business is water goblet. As the business is recovering from economic effect of Covid 19 pandemic, more orders are being received. Production of the water goblet requires skilled labour and semi-skilled labour with two materials of glass and sand. Lannister Enterprise is currently operating at 80% level of capacity producing 110,000 units of water goblet monthly. The following information is provided on production. Sales (110,000 units) Less: Raw materials Sand Glass Labour Skilled (RM5 per hour) Semi-skilled (RM2 per hour) 132,000 264,000 330,000 88,000 275.000 182.000 2,200,000 Production overhead Selling and distribution Net profit For every unit of water goblet production, it uses 100 gram each of sand and glass. The materials of sand and glass was purchased at RM24 and RM12 per kilogram respectively. Variable production overhead consists of 60% of total production overhead and it is absorbed based labour hours. Selling and distribution consist of fixed advertising cost of RM6,000 Additional information: (1,271,000) 929,000 On 28 December 2022, Lannister Enterprise received an online bulk order from Tully Bhd to purchase 25,000 unit of water goblet. They required that each unit of the water goblet to be engraved with a gold colour acrylic ink and packaged in customs container in gold colour. This order will also incur processing cost of RM15,200. However, the customer only has a budget to purchase each unit at RM15. Required: (a) Compute the contribution margin per unit for the water goblet at the current level of production. (b) Based on the special order by Tully Bhd, the gold acrylic ink will cost RM2.50 and custom container will cost RM0.80 per for each unit of water goblet. Analyse whether Lannister Enterprise should accept the order? (c) Tully Bhd would like to increase the order to 30,000 units, and the new processing cost is RM16,700. The cost in 3(b) remain the same. Advise whether Lannister Enterprise should accept the order? (d) Explain what are the relevant cost in decision making and provide ONE (1) example.

Answer rating: 100% (QA)

Lets address each of the questions a through d one by one a Compute the contribution margin per unit for the water goblet at the current level of production To calculate the contribution margin per un... View the full answer