Signatron Corporation Essay

1055 Words Apr 21st, 2013 5 Pages
Signatron Corporation
Producer of rectifiers (electronic 'resistors')
1 Basic facts: Helen Barnes, a recent graduate from B-school is assigned as assistant to Jim Jacoby, Signatron's Sales Manager for rectifiers Order is received for 6,000 units of number 401 rectifiers; not sufficient units (only 3,000) exist in the inventory. Order can be filled with units that met or exceeded the specifications of product ordered (402 or above). Customer will not pay extra for extra quality. 2 Production process: 60% of the total chips are first-class; 40% are seconds < 20% of the total chips are eventually sold as part of the regular product line 3 Accounting Methodology: Direct costs are allocated directly Manufacturing costs are "joint" with
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Factory Manuf. Costs o/h Costs 2,700 13,500 3,600 18,000 2,700 13,500 1,800 9,000 1,200 6,000 12,000 60,000 Relative Sales System Non-variable Gen. Factory Manuf. Costs o/h Costs 1,951 9,756 4,098 20,488 3,415 17,073 1,561 7,805 976 4,878 12,000 60,000

Income Statement under the two scenarios: Current Stock: 3,000 units, Balance to be filled in by 402 No dispute about 401; decision is required on whether 402 should be sold as 401 Item 402 sold as Item 401 Item 402 sold as Item 402 Particulars ACS RSS ACS RSS Selling Price 1,200 1,200 1,800 1,800 Less Costs: Direct Material (125) (125) (125) (125) Direct Labour (80) (80) (80) (80) Variable Overhead (115) (115) (115) (115) NVMC (90) (146) (90) (146) GFOC (450) (732) (450) (732) Profits 340 2 940 602 Since the profits on selling item 402 as item 401 are considerably low as compared to selling 402 as 402, (there are almost NIL profits under the RSS if item 402 is sold as item 401), the idea of filling up the order with 402 is not a great idea if we have ready market for 402. A.3 The toy company wishes to purchase 'seconds' at a price of $0.15 per unit. This offer should be accepted as the inventory for the 'seconds' has been piling up, reaching to 65,000. Though this inventory is recorded at zero

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