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Finance basic theory 01, Study notes of Financial Theory

COMSATS Institute of Information Technology (CIIT)Financial Theory

Basic Finance and Study materials

Typology: Study notes

2021/2022

Uploaded on 01/18/2023

yasir-ahmad
yasir-ahmad 🇵🇰

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Program: BAF-VIII Subject: Strategic Management Accounting
Assignment # 3
This assignment contains one question for assessing the concepts and practical of decision making while
using the Management Accounting as a tool.
Please note this home assignment will be marked, so solution must me neat, clean, presentable.
M/S Atlas Honda Ltd is producing two components A & B for its Motor Cycles. It is
planned to produce 3,000 of unit A and 4,000 of unit B in forthcoming period.
The following data is being provided:
Unit Labor Hrs Variable Cost
A 3 22
B 5 37
A total of 17,000 labour hours are available.
A sub-contractor is willing supply ABC with units of A & B for Rs. 25 and Rs. 40
respectively.
Required:
Advise M/S Atlas Honda Ltd. that which component is to manufactured and compute
the number of units to be purchased and which one?
Please try to attempt the question at your own without copying
from your fellows. This is in your own best interest.
COMSATS UNIVERSITY ISLAMABAD
(Park Road, Shahzad Town, Tarlai, Islamabad)
Department of Management Sciences
pf2

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Program: BAF-VIII Subject: Strategic Management Accounting

Assignment # 3

 This assignment contains one question for assessing the concepts and practical of decision making while using the Management Accounting as a tool.  Please note this home assignment will be marked, so solution must me neat, clean, presentable. M/S Atlas Honda Ltd is producing two components A & B for its Motor Cycles. It is planned to produce 3,000 of unit A and 4,000 of unit B in forthcoming period. The following data is being provided: Unit Labor Hrs Variable Cost A 3 22 B 5 37 A total of 17,000 labour hours are available. A sub-contractor is willing supply ABC with units of A & B for Rs. 25 and Rs. 40 respectively.

Required:

Advise M/S Atlas Honda Ltd. that which component is to manufactured and compute the number of units to be purchased and which one?

Please try to attempt the question at your own without copying

from your fellows. This is in your own best interest.

COMSATS UNIVERSITY ISLAMABAD

(Park Road, Shahzad Town, Tarlai, Islamabad)

Department of Management Sciences

Solution Limited Resource/s: Labor Hours i.e. 17,000 Hours Total Labor Hours, Required to meet the desired output: A: 3,000 x 3= 9, Hours B: 4,000 x 5= 20, Hours Total 29,000 Hours A B Rs. Rs. Marginal Costs to Manufacture 22 37 Marginal Costs to Purchase 25 40 Excess Marginal Costs to Purchase 3 3 Labor Hours Saved if Purchased 03 Hours 05 Hours Costs Saved from Buying the Products Rs. 03/03 Hours Rs. 03/ Hours =Re. 01/- =Re. 0. Total Available Labor Hours 17,000 Hours Total Hours Required to Manufacture Component “A” 9,000 Hours Hours Available to Produce Component “B” 8,000 Hours Maximum Components of “B” which can be produced: 8,000 hours / 05 Hours = 1, Units No. of Components to be Purchased of “B” = 4,000 – 1,600 = 2,400 Units Recommendations: M/S Atlas Honda must manufacture all components of “A” and 1,600 units of “B” and remaining 2,400 units of Component “B” are to be purchased from the sub-contractor.