1) A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows:

Direct Materials 18.50

Direct labor 1.20

Variable manufacturing Overhead 8.40

Fixed manufacturing overhead 3.90

Unit Product cost 32000

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order. Show your work!

2) Veron Corporation purchases potatoes from farmers. The potatoes are then peeled, producing two intermediate products-peels and depeeled spuds. The peels can then be processed further to make a cocktail of organic nutrients. And the depeeled spuds can be processed further to make frozen french fries. A batch of potatoes costs $35 to buy from farmers and $19 to peel in the company's plant. The peels produced from a batch can be sold as is for animal feed for $24 or processed further for $14 to make the cocktail of nutrients that are sold for $48. The depeeled spuds can be sold as is for $34 or processed further for $29 to make frozen french fries that are sold for $55. Required: a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries? Show your work!

b. Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product? Explain.

3) The management of Drummer Corporation is considering dropping product D84L. Data from the company's accounting system appear below:

Sales 800000

variable expense 4400000

fixed manufatoring expense 248000

fixed sekking and administrative 184000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued.

Required: What would be the effect on the company's overall net operating income if product D84L were dropped? Should the product be dropped? Show your work!

4) Closter Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below:

selling .......240.24UX...............465.88HV.....................118.75MG..............................

variabe cost per unit......182.52UX............370.88HV...............91.39MG....................

time on the constrain(minutes).....3.90UX.....7.60HV.............1.90MG................

Required:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized. Show your work!

b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?