accounting assignment

solution.xlsx

Sheet1

1)
Taylors Tailor
	Suits	Pants	Sports Coat
Sale Price	235	60	135
DM	18	6	8
DL	40	10	19
VOH (200% DL)	80	20	38
TVC	138	36	65
Contribution	97	24	70
Randing In terms of Profit	1	3	2
2)
	Suits	Pants	Sports Coat	Total
Mhu (Limiting resourcce)	9	2	5
Contribution Per Machine Hour	10.78	12.00	14.00
Units	1000	5000	2000
Total Resource Requirement	9000	10000	10000	29000
Excess Capacity Machine Hours				1000
	Suits	Pants	Sports Coat
Extra Units that can be producted	111	500	200
Additional Contribution	10778	12000	14000
Ranking	3	2	1
Hence extra units should be used to produce 200 units of Sports Coats as they generate highest additional contribution.
3)
Minimum Cost Accepable (sum of VC)		65
4)
Overtime Working				Per Unit Cost for overtime units
Total Units	300			DM	8
Excess Capacity	200			DL	28.5
Over time	100			VOH	57
				Per Unit Cost	93.5
Sales	36000
Cost of Sales
200 Units	13000
100 Units	9350			Hence Overtime should be utalized
Cost of Sales	22350
Profit	13650
Current Capacity
Sales	36000
Less Contribution Lost	7000
Less Cost of Sales
200 Units	13000
100 Units	6500
Profit	9500
The economic concept of opportunity cost must be considered when making the decision of using current capacity.
5)
Fixed costs are ignored as they remain unchanged and are hence not relevant to the decision of accepting or rejecting the special order.