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

Instructionsall assignments must be typed in a minimum 11

Instructions: All assignments must be typed in a minimum 11 font size into the assignment template question sheet (available on Moodle). Additional pages may be added as needed. There is no word limit, but be guided by t ...

Assignmentyou are a manager of table top limited a

Assignment You are a manager of Table Top Limited, a manufacturer of small tables . You have been instructed to prepare a budget for the next year's operations with the following forecast: The sales volume is forecast to ...

Accounting assessment1 ohio corporation sells its product

Accounting Assessment 1. Ohio Corporation sells its product for $16 per unit and incurs variable costs of $10 per unit and total fixed costs of $12,000. What is Ohio Corporation's break-even point for sales of this produ ...

Managerial accounting assignment task specification-group

Managerial Accounting Assignment Task Specification- Group Report: "Measuring Performance and Management Control Systems" - A review of control systems reported in 2016 annual reports in Australian Public Companies. Subj ...

Decision making under uncertaintyproblem descriptionmangers

Decision Making Under Uncertainty Problem Description Mangers deal with a number of decisions about processes, capacity, location, inventory, etc. The process of making a decision is complicated because of the uncertaint ...

Task question 1 1000 wordsmather and peison 2006 report

Task Question 1 (1000 words) Mather and Peison (2006) report that public debt contracts tend to have a lower average number of accounting based debt covenants as well as less binding debt covenants relative to private de ...

Venus brewery is a craft brewery that produces a special

Venus Brewery is a craft brewery that produces a special light beer for ladies. The beer are processed sequentially in two departments (Department X and Department Y) before the final products are transferred to the fini ...

You have almost convinced yourself that there might be a

You have almost convinced yourself that there might be a successful business in the idea of bringing senior citizens together in arcades to play various games on Wii (or something similar). You think about how people lik ...

Your company has spent 390000 on research to develop a new

Your company has spent $390,000 on research to develop a new computer game. The firm is planning to spend $59,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized a ...

Tri-county cable services inc is organized with three

Tri-County Cable Services, Inc., is organized with three segments: Metro, Suburban, and Outlying. Data for these segments for the year just ended follow. Metro Suburban Outlying Service revenue $ 1,050,000 $ 850,000 $ 45 ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen