Teck Lee Inc Case Study Solution

BACHELOR OF ARTS WITH HONOURS
IN ACCOUNTING AND FINANCE

MODULE TITLE
281ACC DECISION MANAGEMENT

TRAINER’S NAME
HOO JO SANG

NAME
CHANG WEN YI

Table of Contents

1. Part A (a) 3
2. Part A (b) 4
3. Part A (c) 4
4. Part A (d) 5
5. Part A (e) 5
6. Part A (f) 5
7. Part B 6
8. Referencing 10

PART A
a)

b)

Teck Lee Ltd (TLL) should reject purchase the new machine because it has a negative NPV (-$196,605).

C )

d)

e)

f) Teck Lee Ltd (TLL) should not launch the new product because both of NPV in (d) (-$210,491) and ( e) (-$255,962) for new products are negative.

PART B
Introduction
Relevant cost also known as differential cost, it has those costs and

Future costs are cash expense that will be occurring in the future due to a potential decision made. The avoidable costs are these costs related to decision making that if you decide not to implement it and you can decide to avoid. Opportunity costs are costs of measuring the chance of sacrificing when choosing an action plan requires that an alternative to be abandoned. The cash inflows that are sacrificed due to specific management decisions. Incremental cost also known as differential costs. Consideration is given to different alternatives, the relevant costs are the incremental or differential cost between the various alternatives

Special pricing decisions are usually a one-time orders and/or orders below the current market price. Special pricing decision is a technique for calculating the lowest price of a product or service that can accepted a particular order and a special order below that price should be rejected. Usually when a business receives special orders for customers at a below-normal prices. In this cases, if can selling all the output at normal price, the business does not accept special order. However when sales volume is low or the production capacity is insufficient, if the incremental income for special order is greater than the incremental costs, you should accept a special order. This method of pricing special orders, which the pricing is set below the normal price but sales still produce a unit of contribution, known as special order pricing contribution.

Temporary overcapacity and a company have already offered 3,500 per month for $25 per month in the next two months. The extra selling costs of the order will be $1 per