Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factory produces office chairs. Management aims to increase production in the coming year to 800 units per month. Therefore, management is exploring two production strategies for the coming year. The first strategy is to continue operations with the existing machine, Machine A, and the second strategy is to rent a new machine, Machine B, to produce the office chairs. The monthly rental of Machine B is RM14,000. Machine B takes half an hour to produce one office chair. However, it requires a more skilled labour force with an hourly rate of RM30 per hour. Comparatively, continuing to use Machine A means that costs will remain the same. Machine A is 5 years old and is operating below capacity. The hourly labour rate is RM20 and the materials required for each unit is RM30. Each office chair is assembled within an hour. Each unit of the finished office chair is sold for RM120. The fixed monthly running costs of the factory is RM21,000.

Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factory produces office chairs. Management aims to increase production in the coming year to 800 units per month. Therefore, management is exploring two production strategies for the coming year. The first strategy is to continue operations with the existing machine, Machine A, and the second strategy is to rent a new machine, Machine B, to produce the office chairs. The monthly rental of Machine B is RM14,000. Machine B takes half an hour to produce one office chair. However, it requires a more skilled labour force with an hourly rate of RM30 per hour. Comparatively, continuing to use Machine A means that costs will remain the same. Machine A is 5 years old and is operating below capacity. The hourly labour rate is RM20 and the materials required for each unit is RM30. Each office chair is assembled within an hour. Each unit of the finished office chair is sold for RM120. The fixed monthly running costs of the factory is RM21,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factoryproduces office chairs. Management aims to increase production in the coming year to 800units per month. Therefore, management is exploring two production strategies for thecoming year. The first strategy is to continue operations with the existing machine, MachineA, and the second strategy is to rent a new machine, Machine B, to produce the office chairs.The monthly rental of Machine B is RM14,000. Machine B takes half an hour to produce oneoffice chair. However, it requires a more skilled labour force with an hourly rate of RM30 perhour.Comparatively, continuing to use Machine A means that costs will remain the same. MachineA is 5 years old and is operating below capacity. The hourly labour rate is RM20 and thematerials required for each unit is RM30. Each office chair is assembled within an hour. Eachunit of the finished office chair is sold for RM120.The fixed monthly running costs of thefactory is…
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