question archive 3) (a) A company is considering producing a new product
3) (a) A company is considering producing a new product
Subject:AccountingPrice: Bought3
3) (a) A company is considering producing a new product. The company's market research department has indicated that the product is likely to sell for Rs 450. The company's department of finance estimates that total investment required for the product at normal capacity level of 10,000 units is Rs 10,00,000 and ROI should be 15%. And the manufacturing department has estimated the following cost. Variable manufacturing cost per unit Rs.280 Variable selling and administrative cost per unit |Rs. 20 Fixed manufacturing cost per unit Rs 70 Fixed selling and administrative cost per unit RS 20 Required: i) Calculate selling price per unit on the Absorption cost base. ii) Calculate selling price per unit on the Total cost base. Rubric: 1. Selling price per unit on the absorption cost base (2.5 marks) 2. Selling price per unit on the total cost base. (2.5 marks) (b) How do you describe the different perspectives of balance score card. Rubric: Description of four perspectives of balance scorecard (5 marks) 2. P.T.O. 4. A company has installed capacity of 30,000 machine hour. One unit required 0.25 machine hour. Other information are as follows. Production and sales volume 1,00,000 units Direct material per unit RS. 6 Direct labor per unit RS 6 Manufacturing overhead per unit Rs 4 Total cost RS 16 Selling price per unit Rs 20 Budgeted fixed cost at capacity level Rs. 3,60,000. The company receives an offer to supply 60,000 units at a price of Rs 15 per unit Required : i) Prepare statement for differential cost analysis and give decision regarding whether to accept/ reject the special order. ii) Calculate opportunity cost of order if the company accept the order. iii) What other qualitative factors may be relevant if you accept the order? Rubric: 1. Statement for differential cost analysis. (5 marks) 2. Decision for acceptance or rejection (1 mark) 3. Amount of opportunity cost (2 marks) 4. Relevant qualitative factors (2 marks) Or Define budgeting. Explain the relationship between planning and budgeting. How are budgets used in planning? Rubric: 1. Define budget (2 marks) 2. Relationship between planning and budgeting (5 marks) 3. Application of budgeting in planning (3 marks) Group- B
