Homework Answers
1. Relevant cost for special orders
Relevant cost are those that are incurred only when making specific decision i.e. these cost are avoidable.In the given case following cost are relevant
a) Material cost
b) Batch Cost
c) Labor cost
d) Other variable cost
2. Contribution margin per unit of special order
| Sale | $300 |
| (-)Variable cost | |
| Material cost | $160 |
| Labor cost | $80 |
| Other variable cost | $40 |
| Contribution Margin | $20 |
3.Overall profit or loss from special order
| Amount($) | |
| Relevant Gain | |
| Sale (300 units @ $300 per unit ) | 90000 |
| Relevant Cost | |
| Material (300 units @ 160 per unit ) | 48000 |
| Labor (300 units @80 per unit ) | 24000 |
| Other variable cost (@40 per unit ) | 12000 |
| Batch cost (3600 each batch of 200 units X 2 batches) | 7200 |
| Total relevant cost | 91200 |
| Net relevant loss | (1200) |
4.Company D should not accept the special order as it will result in loss of $ 1200
5. Profitability Statement of special order to purchase 600 units
| Amount($) | |
| Relevant Gain | |
| Sale (600 units @ $300per unit ) | 180000 |
| Relevant Cost | |
| Material (600 units @ 160 per unit ) | 96000 |
| Labor (600units @80 per unit ) | 48000 |
| Other variable cost (@40 per unit ) | 24000 |
| Batch cost (3600 each batch of 200 units X 3 batches) | 10800 |
| Total relevant cost | 178800 |
| Net relevant gain | 1200 |
Company should accept the order to purchase 600 units , as it will result in profit of $ 1200
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period. The cost of producing the blankets is summarized
here.
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relevant cost per unit for the special order. Based on the
preceding quantitative data, should...
Finch Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in b...
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Finch Quilting Company makes blankets that it markets through a
variety of department stores. It makes the blankets in batches of
1,000 units. Finch made 26,000 blankets during the prior accounting
period. The cost of producing the blankets is summarized
here.
Sunny Motels has offered to buy a batch of 400 blankets for $60
each. Finch’s normal selling price is $96 per unit. Calculate the
relevant cost per unit for the special order. Based on the
preceding quantitative data, should...
Baird Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Baird made 26,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($27 per unit x 26,000) Labor cost ($21 per unit x 26,000) Manufacturing supplies ($2 x 26,000) Batch-level costs (26 batches at $4,000 per batch) Product-level costs Facility-level costs Total costs Cost per unit = $1,914,000 +...
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