Costing Question – Kindly work for me

Question 1:
Sam’s Engineering Ltd manufactures a variety of industrial valves and pipe fittings that are sold to customers. Currently, the company is operating at 70% of capacity and is earning a satisfactory return on investment. The Water Authority Inc. (WAI) has approached the management of Sam’s Engineering Ltd., with an offer to buy 120,000 units of a pressure valve which it will need to complete a long delayed water supply project in Black Bush Polder. However, because WAI is working with a fixed budget it can only offer Sam’s Engineering $19 for each valve.
Sam’s Engineering’s product costs, based on current attainable standards for the pressure valve is:
Direct material $5.
Direct labour $6.
Manufacturing overhead $9.
Total Cost $20
Manufacturing overhead is applied to production at the rate of $18 per direct labour hour. This overhead rate is made up of the following components:
Variable factory overhead $6.
Direct fixed factory overhead $8 .
Allocated fixed factory overhead $4.
Applied manufacturing overhead rate $18
Additional costs incurred in connection with the sales of me pressure valve include commissions of 5% and freight expense of $1 per unit However the company does not pay sales commissions on special orders that come directly from management
In determining selling prices, Sam’s Engineering Ltd., adds a 40% markup to product costs. This provides a $28 suggested selling price for the pressure valve. The marketing department however has set the current selling price at $27 in order to maintain market share. Production management believes it can handle the WAI order without disrupting its scheduled production. The order would however require additional fixed factory overhead of $12,000 per month in the form of supervision and clerical costs.

If management accepts the order, 30,000 pressure valves will be manufactured each month for four months and WAI has agreed to collect these on the last working day of each month.

a. Prepare an incremental analysis showing the impact of accepting the WAI order.

b. Calculate the minimum price that Sam’s Engineering Ltd. could accept for the WAI order without reducing net income.

c. Identify two factors other than price that Sam’s Engineering Ltd., should consider before accepting the WAI order.

Question 2:
Two investment centers of Keith Products Company are the Electronics Division and the Appliance Division. The Electronics Division manufactures an electronic computer chip that can be sold externally and is also used by the Appliance Division in making motors for its appliances. The following information is available about the computer chip:
Total production annually: 200,000 units; internal requirements: 150,000 units; all others are sold externally
List selling price: $25.60
Variable production costs: $14
Fixed overhead: $300,000; allocated on the basis of units of production
Variable selling costs: $3; includes $1 per unit in advertising costs
Fixed selling costs $400,000
Determine the transfer price under each of the following methods:
a) Total variable cost
b) Full production cost
c) Total variable production cost plus necessary selling costs
d) Market price