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- + ID 28 A Meteo Question 1 (9 marks) Company A has been offered a special order to supply 200 units of the Product Pat unit selling price of $150. The analysis of costs for such production is as follows: Unit Cost of Product P in ) 1 kg of Material X 15 2 kg of Material Y 3 kg of Material z 5 hours of Skilled Labour Hours 4 hours of Semi-Skilled Labour Hours Variable Costs Fixed Costs Total 10 Notes: (a) Company A has to pay $1,000 on market research in next month. It will not be changed whether the production will or will not be carried out. It has been included in Unit Fixed Cost in the above analysis. Half of the fixed cost attributable to the production will be avoided if cease production. 200 kg of Material X at the cost of $3,000 are in stock as a result of previous over buying and they have restricted use. It cannot be converted for sales. Removal of such stock requires $2,000. Material Y is currently used for many production lines. The quoted price was last purchase price. The current replacement cost becomes $2,500 for 400 kg of Material Y. 600 kg Material Z are in stock as a result of previous over buying. There is another use of Material Z for converting into Material W. The cost of conversion will be $1,500 and the sales proceeds after the conversion will be $3,300. There are no other uses of Material Z. - + ID 28 A Meteo Question 1 (9 marks) Company A has been offered a special order to supply 200 units of the Product Pat unit selling price of $150. The analysis of costs for such production is as follows: Unit Cost of Product P in ) 1 kg of Material X 15 2 kg of Material Y 3 kg of Material z 5 hours of Skilled Labour Hours 4 hours of Semi-Skilled Labour Hours Variable Costs Fixed Costs Total 10 Notes: (a) Company A has to pay $1,000 on market research in next month. It will not be changed whether the production will or will not be carried out. It has been included in Unit Fixed Cost in the above analysis. Half of the fixed cost attributable to the production will be avoided if cease production. 200 kg of Material X at the cost of $3,000 are in stock as a result of previous over buying and they have restricted use. It cannot be converted for sales. Removal of such stock requires $2,000. Material Y is currently used for many production lines. The quoted price was last purchase price. The current replacement cost becomes $2,500 for 400 kg of Material Y. 600 kg Material Z are in stock as a result of previous over buying. There is another use of Material Z for converting into Material W. The cost of conversion will be $1,500 and the sales proceeds after the conversion will be $3,300. There are no other uses of Material Z

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