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

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 ...

Individual research paper instructions1write a 8-10-page

INDIVIDUAL RESEARCH PAPER INSTRUCTIONS 1. Write a 8-10-page, double-spaced research paper that adheres to APA format. 2. It must include references from at least 6 different sources, a title page, and a reference page. 3 ...

Managerial accounting budgeting project- springthe

Managerial Accounting Budgeting Project- Spring The following is a Comprehensive Budgeting Problem. You and your team need to prepare a partial Master Budget and then continue on to analyze your data. This is an Excel ba ...

Accounting paperwrite a 1000 - 1250 word paper on the

Accounting Paper Write a 1,000 - 1250 word paper on the following topic: Describe the role of managerial accounting in contemporary business. Provide one specific, real-life example of how managerial accounting helps man ...

Exercise- estimating cost behaviorhigh-low methodjonathan

Exercise- Estimating Cost Behavior;High-Low Method Jonathan Macintosh is a highly successful Pennsylvania orchardman who has formed his own company to produce and package applesauce. Apples can be stored for several mont ...

Problem 1 master budgetomega inc has developed the

Problem 1: Master Budget Omega, Inc. has developed the following sales forecast for the first six months of the coming year Month Sales (in units) January 30,000 February 50,000 March 70,000 April 80,000 May 60,000 June ...

Suppose a firm has had the historical sales figures shown

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using REGRESSION to estimate a trend? 2008: $2,000,000 2009: $1,800,000 2010: $2,200,000 2011: $2,400 ...

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 ...

The facts and figures relating to irrigation corporation

The facts and figures relating to Irrigation Corporation are as follows. Irrigation Corporation produces plastic garden sprinklers. The company is preparing its budget for 2016. The first step is to plan for the first qu ...

Managerial accountingvenus brewery is a craft brewery that

Managerial Accounting 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 t ...

  • 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