Page 289 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Profit 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 profit 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
The directors want to be acquainted with the desirability of adopting any one of the
following alternative sales mixes in the budget for the next period.

(a) 250 units of X and 250 units of Y
(b) 400 units of Y only

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