Tutorial Q. 1Company XYZ has 2 fixed price contracts for 2 different clients. The company has enoughcapacity for both contracts but is uncertain whether they will be profitable.Data as follows:CustomerAAABBBComponent TypeContract Value($)Contract QuantityА999B999$27,000$100,0001,000 unit$155 hours2,000 units$20Material cost/unitMoulding time/ batchBatch Size7.5 hours100 units50 unitsAnnual Budgeted overheads as follows:ActivityCost DriverCost DriverCost poolvolume/year2,000MouldingInspectionProductionMoulding hoursBatches$150,000$75,000$125,000150Contracts20ManagementRequired:Calculate the activity based costs and profits for each contract.Calculate the profit for each job using Absorption costing. Absorb overheadsusing moulding hours.

Marginal costing and absorption costing are two costing methods. Under marginal costing, variable…

Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable. Data as follows: Customer Component Type Contract Value($) Contract Quantity AAA ВВВ A999 В999 $27,000 $100,000 1,000 unit $15 2,000 units $20 Material cost/unit Moulding time/ batch Batch Size 5 hours 7.5 hours 100 units 50 units Annual Budgeted overheads as follows: Activity Cost Driver Cost Driver Cost pool Moulding Inspection Production Moulding hours Batches volume/year 2,000 150 $150,000 $75,000 $125,000 Contracts 20 Management Required: а) b) Calculate the activity based costs and profits for each contract. Calculate the profit for each job using Absorption costing. Absorb overheads using moulding hours.

Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable. Data as follows: Customer Component Type Contract Value($) Contract Quantity AAA ВВВ A999 В999 $27,000 $100,000 1,000 unit $15 2,000 units $20 Material cost/unit Moulding time/ batch Batch Size 5 hours 7.5 hours 100 units 50 units Annual Budgeted overheads as follows: Activity Cost Driver Cost Driver Cost pool Moulding Inspection Production Moulding hours Batches volume/year 2,000 150 $150,000 $75,000 $125,000 Contracts 20 Management Required: а) b) Calculate the activity based costs and profits for each contract. Calculate the profit for each job using Absorption costing. Absorb overheads using moulding hours.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sheffield Corp. incurs the following costs to produce 9000 units of a subcomponent: Direct materials Direct labor Variable overhead Fixed overhead $9000 O $28950 O $(3500) $8950 O $(3250) 12500 12200 20000 An outside supplier has offered to sell Sheffield the subcomponent for $2.75 a unit. No fixed overhead costs are avoidable. If Sheffield accepts the offer, by how much will net income increase (decrease)?
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