Management Accounting Assignment
The Citrus Company produces quality fruit. It has been producing and selling 40,000 boxes per month during the Spring and Summer months. During the Autumn and Winter months it has been noticed that only 30,000 boxes are sold.The Citrus Company provides the following information and has asked you to provide advice on the issues raised in each of the following parts:
Manufacturing costs
Direct material $4.00 per box
Direct labour 2.00 per box
Variable overhead 0.80 per box
Fixed overhead $10,000
Marketing costs
Variable $0.50 per unit
Fixed $15,000
The Citrus Company has been selling these boxes of fruit for $9.50 each and has asked you to provide answers to the following.Each part is to be considered independently of the others.
Required :
(a) Calculate the monthly profit during a Summer month when all 40,000 boxes produced in a month are sold.
(b) A request has come from overseas to supply 5,000 boxes of fruit per month during the Autumn and Winter months at a price of $7.50 per box .If this request is accepted it would cost an extra $0.40 per box for freight and a one off cost of landing cost of $1000 ..Should this one off request be accepted based on profit alone? What other factors should be considered ?
(c) Another request has come in the form of a long term government contract which wants you to supply 10,000 boxes within the country per month for $8 per box .This contract would be for 10,000 boxes each month for the year .Should this offer be accepted?Provide reasons for your decision.
(d)The Citrus Company has had another request from an outside supplier to supply 8,000 boxes of fruit year round(each month) for a price of $7.80 per box.The Citrus Company would incur additional freight costs of $0.20 per box but no other additional costs .Should the Citrus Company accept this offer on financial grounds?What other factors might it consider?
(e)The Citrus Company has an offer to rent out its property to the government so that affordable housing can be built. The government would pay the Citrus Company Parker $60,000 per month ,assuming it would use the property on an ongoing basis .If Citrus Company sells 40,000 boxes during the Spring and Summer months and 30,000 boxes during the Autumn and Winter months should Citrus Company accept the offer on purely financial grounds ..Show calculations to support your answer.