6 MAA DEC 2016.pdf - QUESTION 3 DEC 2016 The MAA Division of Delta Bhd is a division that manufactures wooden components that are used in Delta Bhd’s

6 MAA DEC 2016.pdf - QUESTION 3 DEC 2016 The MAA Division...

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1 QUESTION 3: DEC 2016 The MAA Division of Delta Bhd is a division that manufactures wooden components that are used in Delta Bhd’s final product. At the recent board meeting, the company is considering whether to continue to manufacture one of the components, W222 or purchased it from Manukan Bhd, an outside supplier. Manukan Bhd has submitted a bid to manufacture and supply 200,000 units of W222 that the MAA Division will need for next year at a unit price of RM50. Apart from the purchase cost, Manukan Bhd will charge a transportation fee at RM25,000 per batch of 50,000 units. As an assistant management accountant, Jenny has gathered the following information regarding the MAA Division’s costs to manufacture 50,000 units of W222 in the current year: RM Direct material 700,000 Direct labour - skilled - semi-skilled 450,000 300,000 Rental on factory space 86,400 per year Lease of equipment 78,000 per year Other manufacturing cost 500,000 Jenny has also collected other information regarding the manufacturing of W222 for next year which were as follows: 1. Direct materials used in the production are expected to increase by 10%.
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