Management Accounting Calculations
Grandmaster Ltd
Grandmaster Ltd produceshydraulic hoists which are used by a wide range of companies in the automotive industry. The costs of manufacturing and marketing hydraulic hoists at the company’s normal volume of 3,000 units per month are shown in Exhibit 1.
Exhibit 1
Costs per unit for hydraulic hoists
Unit manufacturing costs: $ $
Variable materials 100
Variable Labor 150
Variable overhead 50
Fixed overhead 120
Total unit manufacturing costs 420
Unit marketing costs:
Variable 50
Fixed 140
Total unit marketing costs 190
Total unit cost $ 610
The following questions refer only to the data given above. Unless otherwise stated, as¬sume there is no connection between the sit¬uations described in the questions; each question is to be treated independently. Moreover, a regular selling price of $740 per unitfor hoists should be assumed unless otherwise stated. Ignore income taxes and other costs that are not mentioned in Exhibit 1or in a question itself.
Required:
Grandmaster Ltd can also manufacture and sell hydraulic pressure valves. Assume that the company is operating at about 70 per cent of capacity and has received an order from Glasgow Industries Ltd for 120,000 valves. Glasgow Industries manufactures a valve that is almost identical to the pressure valve produced by Grandmaster Ltd; however, a fire in Glasgow Industries’ valve plant has shut down its manufacturing operations. Glasgow needs the 120,000 valves over the next four months to meet commitments to its regular customers. Glasgow is prepared to pay $19 each for the valves. The cost of the pressure valve produced by Grandmaster Ltd is $20, calculated as follows:
Direct material $5.00
Direct labour 6.00
Manufacturing overhead 9.00
$20.00
Assume that manufacturing overhead is applied to production at the rate of $18 per standard direct labour hour. This overhead is made up of the following components:
Variable manufacturing overhead $6.00
Fixed manuf. overhead (traceable) 8.00
Fixed manuf. Overhead (allocated) 4.00
Applied manuf. overhead rate $18.00
Additional costs incurred in connection with sales of the pressure valve include sales commissions of 5 per cent of sales, and freight expense of $1 per unit. However, the company does not pay sales commissions on special orders that come directly to management. In determining the selling prices of its valves, Grandmasteradds a 40 per cent mark-up to total product cost. This provides a $28 suggested selling price for the pressure valve. The Marketing Department,however,has set the current selling price at $27 in order to maintain market share.
Grandmaster’s production manager believes that the company can handle the Glasgow order without its current production schedule being disrupted. The order would, however, impose additional fixed factory overhead costs of $12,000 per month due to the need to employ additional production supervisors and factory office staff on a temporary basis. If Grandmaster’s management accepts the order, 30,000 pressure valves will be manufactured and shipped to Glasgow Industries each month for the next four months. Glasgow’s management has agreed to pay the shipping charges for the valves.
a. Determine how many direct labour hours would be required each month to fill the Glasgow Industries order. (1 mark)
b. Prepare an analysis showing the impact on profit of acceptingthe Glasgow Industries order. (2 marks)
c. Calculate the minimum unit price that Grandmaster could accept for the Glasgow Industries order without reducing net profit. (1 mark)
d. Identify the factors,other than price, that Grandmaster’s management should consider before accepting The Glasgow Industries order. (3 marks)
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT ?
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.