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Management Accounting Paper

2814 words - 12 pages

Jan Turyna

Management Board of Furniture Company X is considering one-year contract for producing office desks. Accounting Department has prepared preliminary list of contract costs and revenues:
|Specification |Amount |
|1. Direct material costs, including: | |
|- plywood (stock-carried in company’s store) |20000 |
|- varnish (ordered) ...view middle of the document...

It is possible to use it also for producing book-shelves as a substitute of wood of value 25000. In such a case, adaptation of plywood is necessary; estimated cost of adaptation is 2500.

2. The varnish has been ordered 2 months ago but the delivery is behind time because of disaster (fire) in varnish factory. In such a case decreasing of purchase price has been negotiated. If the furniture company has resigned desks’ contract then the varnish should be sold with a selling price of 4500.

3. The metal connectors can be used only for the production of office desks. They’ll be ordered only in the case of contract.

4. Company’s Management Board has decided before to employ a technical supervisor That decision doesn’t depend on the desks’ contract realization. But if the contract will be agreed upon then another supervisor employment, with a one-year salary of 4000 will be necessary.

5. The rented equipment is actually used for production of wardrobes. If the desks’ contract will be realized then a new rental of extra equipment for wardrobes production, with rental fee of 250/week is necessary.

6. Company’s own equipment has been bought 3 years ago for 50000 and its full time of usage was planned for 5 years. The actual value of cumulated depreciation is 30000 and one-year depreciation is 10000. If the equipment hasn’t been used for the production of office desks then it should be sold immediately, for 12000. The selling price of that equipment after the contract is 6000.

7. The general overhead costs are mainly spendings for company’s administration. The level of the costs doesn’t depend on the contract.
Should the Management Board decide to realize the contract or to resign it.

The bike-producer company produced 1000 mountain bikes. The costs of production and revenues were following:
|Items |Amounts |
|1. The selling costs, including: | |
|advertising |8000,- |
|salaries |15000,- |
|business trips |3000,- |
|selling office rental |2000,- |
|insurances of forwarding |2000,- |
|2. The production variable costs |100000,- |
|3. Sales |250000,- ...

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