Question
In: Accounting
HASF Glassworks makes glass flanges for scientific use Material cost Rs.10 per flange and the glass...
HASF Glassworks makes glass flanges for scientific use Material
cost Rs.10 per flange and the glass blowers are paid a wage rate of
100 per hours a glass blower blows 20 flanges in two hours. Fixed
manufacturing costs for flanges are 25000 per period. other
non-manufacturing cost associated with flanges
are 10,000 per period and are fixed.
Required:
a. Find out variable cost per units and total fixed cost.
b. Assume Company manufactures and sells 10,000 flanges this period
their competitor sells
flanges for 15 each. can company sell below competitor price and
make a profit on the
flanges
c. How would be your answer to requirement 2 differ if company made
and sold 20,000
flanges this period why
Solutions
Expert Solution
Answer:- material cost = 10000× 10 = ₹100000
wage rate = 100 ₹ per hour
Blowers blow 20 flanges in two hour
For 10000 flanges hour required = 2/20×10000 = 1000 hour.
Wage for 1000 hours = 100/1×1000= ₹10000
a) variable cost = 100000 +10000 = ₹110000
variable cost = ₹110000/10000units = ₹11 per unit
Total fixed cost = 25000 +10000 = ₹35000
b) total cost for 10000 flanges = 10000×11 + 35000 = ₹145000
Cost per unit = 145000/10000units = ₹14.5
Company can sell below it's competitor price to make profit because it's cost of production is less than the price of competitors.
c) if company sell 20000 units
Varible cost = 11×20000 =₹220000
Fixed cost = ₹35000
Total cost = ₹255000
Cost per unit =₹ 12.75 (255000/20000)
Cost will decrease if production will be of 20000 units.
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