1. Kiwi Inc. is considering using stocks of an old raw material in a special project. The special project would require all 200 kilograms of the raw material that are in stock and that originally cost the company $2,500 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $10 per kilogram. However, the company has no other use for the raw material that is on hand and would sell it at the discounted price of $8 per kilogram if it were not used in the special project. It would cost $90 to deliver it to the purchaser.

A. First what costs above are not relevant? _______________________________________________

B. What are the total relevant costs? ______________________

2. Kasey Corporation produces and sells 13,000 units of Product X each month. The selling price of Product X is $20 per unit, and variable expenses are $14 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $75,000 of the $103,000 in monthly fixed expenses traceable to Product X would not be avoidable even if the product was discontinued. Show the numbers you use to determine the answer for A. below. A. $_________________What is the annual financial advantage (or disadvantage) of discontinuing Product X? B. Circle: Advantage or Disadvantage

3. Below is a list of the per unit costs the company incurs for the product they produce. The company has received an order for 2,000 units to be sold for $17 each which is $5 less than the normal sales price. The company will need to invest in a stamping machine that will cost $1,500 in order to fulfill the requirements of the order. None of the fixed MOH costs can be eliminated, and if the special order is accepted, variable MOH will increase by $2. A. Will incremental revenues exceed incremental costs for this special order? ________ B. What is the dollar amount of the difference between incremental revenues and costs? $______________ Show the numbers you use to determine the answer.

DM 5 DL 7 VARIABLE MOH 2 FIXED MOH 2.50 16.50

4. A company makes 2,000 widgets. The costs to make a widget are

DM 10 DL 4 VARIABLE MOH 6 FIXED MOH 10 $6 CAN BE AVOIDED IF THE WIDGETS ARE PURCHASED 30

If the units are purchased instead of made, there will be a chance to rent out part of the factory for $16,000. The cost to buy the units is $30 each unit purchased.

A. _________________What are the relevant costs per unit?

B. __________________________________What kind of cost is the $16,000?

C. What should the company domake or buy the widgets and how much better off will they be with your decision? Do both columns for relevant costs (one for the avoidable costs for the make decision and one for the avoidable costs for the buy decision). ________________________ $_______________

5. Machine hours are the constraint and the company only has 1,000 hours to use to produce 2 products. They can sell as many of each product as can be made. Product A Product B

Sales price per unit 51 40 Variable costs per unit 30 28 MHs needed 7 2

A. How many units of each should be produced to maximize profits?

Product A ________________________ Product B ____________________

B. If the company had 3 productsthe two above and a third one Product C that could be sold for 100 with variable costs of 80 and taking 4 hours to produce, rank the products from the most profitable to the least profitable use of the constrained resource.

C. What should the company be willing to pay to acquire more of the constrained resource? $_________