英语论文网

JB Ltd is a small specialist manufacturer of electronic components and much of its output is used by the makers of aircraft for both civil and military purposes. One of the few aircraft manufacturers has offered a contract to JB Ltd for the supply, over the next 12 months, of 400 identical components.

The data relating to the production of each component is as follows:

(1) Material requirements 

3 kg material M1 – see note (i) below

2 kg material P2 – see note (ii) below

1 part no. 678 – see note (iii) below

Notes:

(i) Material M1 is in continuous use by the company. 1,000 kg are currently held in stock at a book value of £4.70/kg but it is known that future purchases will cost £5.50/kg.

(ii) 1,200 kg of material P2 are held in stock. The original cost of this material was £4.30/kg but, as the material has not been required for the last two years, it has been written down to £1.50/kg scrap value. The only foreseeable alternative use is as a substitute for material P4 (in current use) but this would involve further processing costs of £1.60/kg. The current cost of material P4 is £3.60/kg.

(iii) It is estimated that the part no. 678 could be bought for £50 each.

(2) Labour requirements

Each component would require five hours of skilled labour and five hours of semiskilled. An employee possessing the necessary skills is available and is currently paid £5/hour. A replacement would, however, have to be obtained at a rate of £4/hour for the work which would otherwise be done by the skilled employee. The current rate for semi-skilled work is £3/hour and an additional employee could be appointed for this work.

(3) Overhead

JB Ltd absorbs overhead by a machine hour rate, currently £20/hour, of which £7 is

for variable overhead and £13 for fixed overhead. If this contract is undertaken, it is

estimated that fixed costs will increase for the duration of the contract by £3,200.

Spare machine capacity is available and each component would require four machine hours.

A price of £145 per component has been suggested by the large company which makes aircraft.

Required: 

As the management accountant for JB Ltd, you have been asked to: 

1.  State whether or not the contract should be accepted.  Your conclusion must be supported by the appropriate figures for presentation to management, with a clear explanation of how you calculated each amount and your reasons for it.  (60%) 

2.  Comment on three factors which management ought to also consider and which may influence their decision.  (15%)      

3.  The board of directors of JB Ltd have very little accounting knowledge, especially management accounting.  They have asked that you explain to them the theory you have used to come to your conclusion. (25%) 

Note

The marks available for question 1, will be divided between the numerical answer and the explanation, as to why the amount has been included

Word guideline

There is a word guideline of 1500 words. 

Submission date

We本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。