PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product are given in the following table: Selling price Variable costs: Direct material Direct labour Other variable costs Total Variable costs Contribution Margin Contribution margin ratio X $360 $48 $40 $164 $252 $108 30% Finished Good Y $540 $144 $50 $130 $324 $216 40% Z $480 $64 $60 $236 $360 $120 25% The same raw materials are used in all three products. PQR company has only 5,000 kilograms of raw materials on hand and will not be able to obtain more of it for several weeks due to the recent outbreak of COVID 19 in its supplier's plant. The production manager has approached the management accountant for help in deciding which product(s) to concentrate on when filling its backlog orders. The raw materials cost $8 per kilogram. Required: a) Compute each product's contribution margin per Kilogram of raw material? (5 marks) b) Which of the orders for X, Y and Z would you recommend that PQR company work on next week? Justify your answer with your computations? (5 marks) c) A supplier from a foreign country is available to provide the additional raw materials at a premium price. If there is unfilled demand for all three products, what is the highest price per kilogram that PQR company should be willing to pay for additional raw materials? Explain your answer. (10 marks) PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product are given in the following table: Selling price Variable costs: Direct material Direct labour Other variable costs Total Variable costs Contribution Margin Contribution margin ratio X $360 $48 $40 $164 $252 $108 30% Finished Good Y $540 $144 $50 $130 $324 $216 40% Z $480 $64 $60 $236 $360 $120 25% The same raw materials are used in all three products. PQR company has only 5,000 kilograms of raw materials on hand and will not be able to obtain more of it for several weeks due to the recent outbreak of COVID 19 in its supplier's plant. The production manager has approached the management accountant for help in deciding which product(s) to concentrate on when filling its backlog orders. The raw materials cost $8 per kilogram. Required: a) Compute each product's contribution margin per Kilogram of raw material? (5 marks) b) Which of the orders for X, Y and Z would you recommend that PQR company work on next week? Justify your answer with your computations? (5 marks) c) A supplier from a foreign country is available to provide the additional raw materials at a premium price. If there is unfilled demand for all three products, what is the highest price per kilogram that PQR company should be willing to pay for additional raw materials? Explain your answer. (10 marks)
Expert Answer:
Answer rating: 100% (QA)
A B As we are able to see from the computations higher than Product X has highest contribution per m... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
1. What are some examples of Ford's variable costs (please discuss and explain 3)? 2. What are some examples of Ford's fixed costs (please discuss and explain 3)? 3. Is Ford a highly levered company?...
-
Based on the historical record, if you invest in long-term U.S. Treasury bonds, what is the approximate probability that your return will be below-6.3% in a given year? What range of returns would...
-
In this assignment you need to write a program in MIPS assembly language. Your program should perform following tasks: It should prompt the user to enter five numbers one by one. Once user has...
-
Consider an electric motor with a shaft power output of 20 kW and an efficiency of 88 percent. Determine the rate at which the motor dissipates heat to the room it is in when the motor operates at...
-
Essex Corp. of St. Louis is a small manufacturer of parts for Boeings Aircraft and Missile Systems. In the late 1990s, Essex was trying to establish a SPC program. Part number 528003-N was typical....
-
Describe the system of oversight of the audit profession in your country. Compare this system with the PCAOB standards. Discuss differences. US students should analyse the oversight system in the UK...
-
Riley has a daily calorie intake of 2,200 calories and wants to take in \(20 \%\) of their calories as protein. How many calories of protein should be in their daily diet?
-
American Fabrics has budgeted overhead costs of $990,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be...
-
Spencer is an accountant for Spectra Company, a company that recently purchased a copyright with a remaining legal life of 50 years. At the time of purchase Spectra conducted an extensive analysis of...
-
Ten replicate analyses of the concentration of mercury in a sample of commercial gas condensate gave the following results: 23.3 22.5 21.9 21.5 19.9 21.3 21.7 23.8 22.6 24.7 ng ml1 Calculate: the...
-
Consider now a similar setting as the one from the previous exercise, nut suppose now that there are N consumers of type and N consumers of type 02. Preferences are the same as before and = 10,0 =...
-
Joseph Bloom was confused and disappointed. As IT director for a medium-sized technology firm, he knew that he had to recruit and select 3 junior analysts as the people filling these roles had all...
-
Optico manufactures telecommunication equipment. The company has 3 factories and serves 6 markets. Operations management team of the company is assigned to study the network and identify the plants...
-
explain the role of organismal genetics in determining individual variation in traits, and how this variation contributes to natural selection, evolution, and species diversification over time ?
-
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates for budgeting purposes...
-
What are the mechanisms underlying genetic variation at the molecular level, including single nucleotide polymorphisms (SNPs), copy number variations (CNVs), and structural rearrangements, and how do...
-
Beth and Bob Martin have total take-home pay of $2,100 a month. Their monthly expenses total $1,550. Calculate the minimum amount this couple needs to establish an emergency fund. Minimum emergency...
-
What are technical skills At what level are they most important and why?
-
Which produces more energy, the fissioning of a single uranium nucleus or the fusing of a pair of deuterium nuclei? The fissioning of a gram of uranium or the fusing of a gram of deuterium? (Why do...
-
At the instant that a high-pressure region is created just outside the prongs of a vibrating tuning fork, what is being created inside between the prongs?
-
If you had two bars of iron-one magnetized and one non magnetized-and no other materials at hand, how could you determine which bar was the magnet? ?
-
On December 31, 2020, Delta Inc. recorded \(\$ 28,000\) of deferred revenue (a liability) on customer deposits received in advance of the satisfaction of performance obligations. However, this amount...
-
Assuming the same information in Brief Exercise 18-25, record the income tax journal entry on December 31, 2020. Assume zero beginning balances in deferred tax accounts and there are no other...
-
Assume Company A and Company B each had a balance in deferred tax assets of \(\$ 250,000\). However, Company A has a valuation allowance related to the deferred tax asset of \(\$ 200,000\) while...
Study smarter with the SolutionInn App