Page 251 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Variable overheads 1,000

Fixed overheads 200
Depreciation 200
Variable selling overheads 100
Royalty 200
Profi t 1,000
Central excise duty 600

Total 6,900
(a) A foreign buyer has offered to buy 200 such motors at ` 5,000 each. As a cost
accountant of the company would you advise acceptance of the offer?

(b) What should the company quote for a motor to be purchased by a company under
the same management if it would be at cost.
(Ans. (a) Accept it because incremental profi t is ` 40,000 and (b) ` 5,200)
9. The management of a company finds that while the cost of making a component part is

` 10, the same is available in the market at ` 9 with an assurance of continuous supply.
Give a suggestion whether to make or buy this part. Also give your views in case the
supplier reduces the price from ` 9 to ` 8.
The cost information is as follows:
(`)
Material 3.50
Direct labour 4.00

Other variable expenses 1.00
Fixed expenses 1.50
Total 10.00
10. The following information has been made available from the cost records of United
Automobiles Ltd. manufacturing spare parts.
Direct Materials Per Unit
X ` 8

Y ` 6
Direct wages
X 24 hours at 25 paise per hour
Y 16 hours at 25 paise per hour
Variable overheads 150% of wages
Fixed overheads ` 750

Selling price
X ` 25
Y ` 20

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