1. Aziz produces Standard and Deluxe sunglasses:

The company has 15,000 machine hours available. In one machine hour, Aziz can produce 70 pairs of the Standard model or 30 pairs of the Deluxe model. Assuming machine hours is a constraint, which model should Aziz emphasize?
2. SmartSocks incurs the following costs for 20,000 pairs of its high-tech hiking socks:

Another manufacturer has offered to sell SmartSocks similar socks for \($10\) a pair, a total purchase cost of \($200,000\). If SmartSocks outsources and leaves its plant idle, it can save \($50,000\) of fixed overhead cost. Or the company can use the released facilities to make other products that will contribute \($70,000\) to profits. In this case, the company will not be able to avoid any fixed costs. Identify and analyze the alternatives. What is the best course of action?

3. A local home improvement warehouse store shows the following product line income statement for the month. All common fixed costs are allocated to departments based on percentage of sales revenue generated by the department.

Assuming \($30,000\) of the Lighting Department’s direct fixed costs are avoidable, should the store managers discontinue the Lighting Department? The space currently occupied by the Lighting Department would be replaced with a Hardware Department that is expected to have sales of \($200,000,\) variable costs of \($80,000\) and new direct fixed costs of \($30,000\).

Transcribed Image Text:

Per Pair Standard Sales price $20 Variable expenses 16 Deluxe $30 21