Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Managerial Accounting Expert

Trinco Ltd:

Introduction:

Trinco Ltd (Trinidad and Tobago-T&T) has been negotiating a contract with a potential customer in Jamaica. Before the negotiations began the Jamaican company agreed to pay $10,000 in advance to cover the expenditures of Trinco. Such expenses were to cover the costs of sending out technical staff to Jamaica. This is the first export order the company has received since 1988. Unfortunately, the prior export orders were not profitable and managers decided the best strategy was to concentrate on business in T&T.

The sales department has prepared a statement exhibiting that the contract will make a profit. It is normal for the sales department to make cost estimates as they have a lot of experience of this type of work.

Occasionally the management accountant will as well be asked to comment on the estimates prepared by the sales department. As this order is different and might lead to a lot more business in the future the senior managers asked the management accountant to comment on the statement, illustrated below.

Statement prepared by sales department:

564_statement by sales department.jpg

After her investigation the management accountant prepared a short report. The major points are summarized below. 
Comments from management accountant:

Note 1: The deposit will not have to be refunded.

Note 2: The labor costs comprise $15,000 of costs for work that has already been incurred. This is the cost of sending engineers to Jamaica to help with the negotiations.

Note 3: This is 50% of the cost of a supervisor. It is predicted that the supervisor will spend about half his time on the contract. This cost doesn’t comprise a $2,000 bonus for the supervisor if the contract is completed on time.

Note 4: Such costs have already been incurred.

Note 5: This charge is equivalent to 10% of sales. This is levied on all contracts to cover general administrative costs.

Note 6: Materials

40,000kg of material X at $1.5 per kg =   $60,000
20,000kg of material Y at $2.50 per kg = $50,000

Material X is employed regularly by the company. There is 20,000 kg in stock however the market price has just raised to $2 per kg.

Material Y is never used by the company. There is 30,000 kg in stock that cost $2.50 per kg. To buy it now would cost $4 per kg. An alternative choice for the company is to sell it for scrap at $2.10 per kg.

Note 7: Depreciation has been computed at $5,000. Though the management accountant discovers that this charge is for a machine that is presently not used. The management accountant has received an offer of $100,000 for the machine now but if the project goes ahead it will only be sold for $50,000 at the end of the project.

Additional information:

The statement above doesn’t comprise the cost of additional training if the contract goes ahead. The cost of the training has been estimated at $10,000.

problem 1:

Advise managers whether or not this contract is profitable. All suppositions should be clearly stated.

problem 2:

Recognize and assess any additional information that managers require to consider before accepting or rejecting this contract.

Managerial Accounting, Accounting

  • Category:- Managerial Accounting
  • Reference No.:- M92980

Have any Question? 


Related Questions in Managerial Accounting

The following selected transactions were completed during

The following selected transactions were completed during August of the current year: Aug. 1 Billed customers for fees earned, $74,140. 4 Purchased supplies on account, $2,150. 8 Received cash from customers on account, ...

This is an assignment consisting of two parts part a and

This is an assignment consisting of two parts , Part A and Part B. Part A Report format is to be used for this part Transfer pricing is used when products or services are transferred  between different divisions of the s ...

1accounts receivable arising from sales to customers

1. Accounts receivable arising from sales to customers amounted to $120000 and $105000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $457000. Exclusive of th ...

Equity method journal entries with intercompany sales of

Equity method journal entries with intercompany sales of inventory Assume that an investor owns 35% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Invest ...

Median earnings the graph in the next column shows the

Median Earnings The graph in the next column shows the median earnings for females from 2005 to 2009 in constant 2009 dollars. (a) How is the bar graph misleading? What does the graph seem to convey? (b) Redraw the graph ...

Modern managerial accounting techniquesmanagerial

Modern Managerial Accounting Techniques Managerial accounting is changing rapidly as a result of technology and new types of enterprises. Below is an article that states the opposite (Talha et al, 2010). How can we recon ...

Question 1 job costinga create a spreadsheet solution to

QUESTION 1 Job costing A. Create a spreadsheet solution to the following problem. Follow the template provided. Play the Job cost podcasts and work through the example problem in those podcasts. Design your spreadsheet t ...

The requirement is listed belowprovide your views and

The requirement is listed below, Provide your views and reasons as to whether or not the London or New York stock markets will ever become completely ‘semi-strong' efficient as defined by the efficient market hypothesis. ...

This is an assignment consisting of two parts part a and

This is an assignment consisting of two parts , Part A and Part B. Part A Report format is to be used for this part Transfer pricing is used when products or services are transferred between different divisions of the sa ...

Payroll and payroll taxes the payroll of the rand company

Payroll and Payroll Taxes The payroll of the Rand Company on December 31 of the current year is as follows: 1) Total Payroll, $500,000 2) Payroll in excess of $100,000 to each employee, $350,000 3) Payroll in excess of $ ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate