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- This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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- March 16, 2018 at 9:38 pm #442819AnonymousInactive
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hello could you please help me
Goodlinks Inc. manufactures windscreens of Type 1 and sells this product to large car manufacturers around the world.
Due to the recession, however, sales of Type 1 windscreens have been far less than the expected annual volume of 120,000,000 units. Therefore, the company has ended each year with significant unused capacity.
Goodlinks has the following annual costs:
Variable costs per windscreen:
Direct Materials £100
Variable Manufacturing Overhead £70
Sales Commissions £45
Direct Manufacturing Labour £20
Total fixed costs:
Advertising £20,500
Customer hotline service £40,500
Machine set-ups £2,000,000
Plant machinery lease £900,000
To improve sales, Goodlinks has decided to search for potential special orders from other companies in the market. BigCar Ltd., the manufacturer that builds cars for armed forces, offered to buy 100,000 windscreens from Goodlinks during March for £200 a unit. The chief controller of Goodlinks, James White, was very excited about the company’s entry into this new market and hoped that this would increase the use of the expensive windscreen plant.
In addition, James arranged a meeting with several of Goodlinks key production managers to discuss the special order. In the meeting, he discovered the following information:
• The special order will not incur any additional marketing or customer-service costs
• The total machine set-up costs would increase by £800,000 if the special order is accepted.
• Goodlinks leases its plant machinery. The production manager negotiates and signs the lease agreement on the first day of each year. Goodlinks currently leases machinery to produce 120,000,000 units of Type A windscreens.
• BigCar requires an independent inspection of every facility that might be used to fulfil its order. Thus, the terms of the special offer would require Goodlinks to set an independent inspection team that will incur £20,000 in costs.should they accept or reject the order?
March 17, 2018 at 3:00 pm #442861First, this could not possibly be asked in Paper F2. It is relevant costing and relevant costing is not in the syllabus for Paper F2.
Second, you should not be attempting questions for which you do not have an answer, unless you have been set it as an assignment. You should be using a Revision Kit from one of the ACCA approved publishers. They have answers and explanations and so ask whatever it is in the answer you are not clear about and then I will help you.
I this has been set you as an assignment, then we don’t provide answers to assignments!!!
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