Notes: Materials are charged at RM20 per kg and direct labour hors at RM25 per hour (skilled worker). As Rihana has just bought new production machine, she is confident that her company is capable to meet the demand of the month. Required: (a). Advise Rihana as to which pricing method is appropriate
Rihana is the owner of Riahan Furniture Sdn Bhd , a company involve in rattan furniture industry, which manufactures various designs and sizes of furniture in sets and individual items. All these years, the company has always adopted a simple approach of pricing and gives discounts when customer negotiate the price. Rihana feels that a high turnover is important for improved profitability of the business. There are three types of furniture which Riahan Sdn Bhd produces namely Type A, Type B and Type C. The following information are related to Riahan Sdn Bhd production and demand for the month of August 2021 for a unit (set) of product Type A, Type B and Type C:
|
Details |
Type A |
Type B |
Type C |
|
Material Consumption (in kg) |
50 |
70 |
90 |
|
Direct Labour hours |
24 |
30 |
40 |
|
Manufacturing overheads |
RM45 |
RM50 |
RM40 |
|
Other fix Overheads |
RM35 |
RM25 |
RM45 |
|
Demand for the Month (sets) |
200 |
400 |
120 |
Notes: Materials are charged at RM20 per kg and direct labour hors at RM25 per hour (skilled worker). As Rihana has just bought new production machine, she is confident that her company is capable to meet the demand of the month.
Required:
(a). Advise Rihana as to which pricing method is appropriate for the three types of furniture.
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