PLEASE ANSWER THIS COST ACCOUNTING QUESTION IN DETAIL WITH STEP WISE EXPLANATION. REFER TO THE QUESTION IN THE IMAGE. THANKS IN ADVANCE, I'LL GIVE THUMBS UP PLEASE ANSWER AS SOON AS POSSIBLE AS I HAVE A VERY IMPORTANT EXAM TOMORROW.
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Required: each situation should be considered independent of another unless specified
Marks
A If the sales volume is estimated to be tons in the next year, and if the prices and costs stay at the same levels and amounts, what is the net income that management can expect for
B OLC has been trying for years to get a foothold in the European market. The company has a potential German customer that has offered to buy tons at Rs per ton. Assume that all of the firm's costs would be the same levels and rates as in What net income would the firm earn if it took this order and rejected some business from regular customers so as not to exceed capacity?
C OLC plans to market its product in a new territory. Management estimates that an advertising and promotion program costing Rs annually would be required. In addition, a Rs per ton sales commission to the sales force in the new territory, over and above the current commission, would be required. How many tons would have to be sold in the new territory to maintain the firm's current net income? Assume that sales and costs will continue as in in the firms' established territories. If the potential market in new territory is for tons, should the company expand its operation to the new territory?
D Management is considering replacing its labourintensive process with an automated production system which in turn will enable improving the quality of the product and thus increased sales. This would result in an increase of Rs annually in fixed manufacturing costs. The variable manufacturing costs would decrease by Rs per ton. Compute the new break even volume in tons and in sales value. If the increased sales potential from such automation is units, should company carry out the automation?
