Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Managerial Accounting Expert

Introduction

Trinco Ltd (Trinidad & Tobago-T&T) has been negotiating a contract with the potential customer in the Jamaica. Before negotiations started the Jamaican company accepted to pay $10,000 in advance to cover the expenditures of Trinco. These expenditures were to cover the costs of sending out technical staff to the Jamaica. This is the first export order the company has obtained since 1988. Regrettably, the previous export orders weren’t profitable and managers decided the best policy was to concentrate on business in T&T.

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

Occasionally the management accountant will also be asked to comment on estimates made by the sales department. As this order is different and might lead to a lot more business in the prospect the senior managers asked the management accountant to comment on the statement, shown below.

Statement prepared by sales department
 
                                                                                             $
Sales - including deposit of $20,000 (see note 1)                       250,000
Labour (see note 2)                                                               85,000
Supervisor (see note 3)                                                          15,000
Design overheads (see note 4)                                                  2,000
Administrative charge (see note 5)                                           25,000
Materials (see note 6)                                                          110,000
Depreciation on machinery (see note 7)                                      5,000
Profit                                                                                  $8,000

After her exploration the management accountant made a concise report. The main points are summarised below.

Comments from management accountant

Note1.  The deposit will not have to be refunded.

Note2. The labour costs comprise $15,000 of costs for work that has already been acquired. This is the cost of sending engineers to Jamaica to assist with the negotiations. 
 
Note3. This is 50% of the cost of a supervisor. It is estimated that the supervisor will pay out about half his time on contract. This cost doesn’t include a $2,000 bonus for the supervisor if the contract is completed on time.

Note4. These costs have already been acquired.

Note5. This charge is equivalent to 10% of sales. This is levied on all contracts to cover general administrative costs.

Note6. 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 used regularly by company. There is 20,000kg in stock excluding the market price has just raised to $2 per kg.

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

Note7. Depreciation has been computed at $5,000. However the management accountant discovers that this charge is for a machine that is currently not employed. 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 include 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 assumptions should be clearly stated.

problem 2

Identify and find out any additional information that managers require to consider before accepting or rejecting this contract

Managerial Accounting, Accounting

  • Category:- Managerial Accounting
  • Reference No.:- M91670

Have any Question? 


Related Questions in Managerial Accounting

Managerial accounting-you have just been hired as a

Managerial Accounting- You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company's financial statement ...

Accounting1 from the e-activity assess the advantages and

Accounting 1. From the e-Activity, assess the advantages and disadvantages of the continued use of the traditional relational database and then decide if businesses should be moving toward relational databases in the clo ...

Assignmentpart 1use the following data for questions 1 and

Assignment Part 1 Use the following data for questions 1 and 2. Fox Company manufactures a specialty line of belts. The company uses a job-order costing system. Cost detail for the job follow: Units produced 5,000 belts ...

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 ...

Accounting for managers- assignmentfinancial statement

Accounting for Managers- Assignment Financial Statement Analysis The following information relates to Harris Corporation. Account Current year Prior year Net sales (all credit) $520,125 $499,500 Cost of goods sold $375,9 ...

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 ...

Free cash flow you are considering an investment in cruise

Free Cash Flow: You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $206 million, paid taxes of $47 million, ...

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 ...

Need research paper by december 5th 2016compose a research

Need Research Paper by December 5th, 2016 Compose a research paper that discusses the use of either the balanced scorecard or economic value added as a tool for improving organization performance. The paper must be doubl ...

Analysis last year pjs ice cream parlors inc reported an

Analysis Last year, PJ's Ice Cream Parlors, Inc. reported an ROE = 12.0%. The firm's debt ratio was 40%, sales were $25 million, and the capital intensity ratio was .75 times. What is the net income for PJ's last year? ( ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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