1

Perro Muerto has a capacity to manufacture 10,000 bricks per week. The operations for the week are as follow:

Sales (8,500 units @$14 each)

$ 119,000

Manufacturing costs

Variable

$8 per unit

Fixed

$ 12,000

Manufacturing costs

Variable commisions

$1.5 per unit

Fixed

$2,000

Perro Muerto is offered a special order of 1,500 bricks at a selling price of $10 each. Assume these units are subject to 33% INCREASE of the usual

commission rate per unit. There is no effect on the regular sales. Should Perro Muerto take the special order?

2

Perro Muerto has a capacity to manufacture 10,000 bricks per week. The operations for the week are as follow:

Sales (8,500 units @$14 each)

$ 119,000

Manufacturing costs

Variable

$8 per unit

Fixed

$ 12,000

Manufacturing costs

Variable commisions

$1.5 per unit

Fixed

$2,000

Perro Muerto is offered a special order of 1,500 bricks at a selling price of $12.5 each. Assume these units are subject to the usual

commission rate per unit. However the sales price of the regular sales is reduced by 1%. Should Perro Muerto take the special order?

3

The theory of constraints (TOC) acknowledges that businesses often have constraints or limits on what can be done.

TOC focuses on all of these factors EXCEPT:

a

Throughput contribution

b

Investments

c

Other operating costs

d

Pricing strategies

4

Guanabacoa is a catering business. It currently serves two institutions; Oso Blanco and Santa Marta. The following information is about Guanabacoa's

revenues and costs for the previous year. Use differential analysis to determine if the Oso Blanco account should be discontinued:

Oso Blanco

Santa Marta

Revenue

$ 230

$ 480

Operating costs

Cost of service (variable)

212

250

Fixed costs

20

25

Total operating costs

$ 232

$ 275

Operating Profits

$ (2)

$ 205

5

Guanabacoa is a catering business. It currently serves two institutions; Oso Blanco and Santa Marta. The following information is about Guanabacoa's

revenues and costs for the previous year. Use differential analysis to determine if the Santa Marta account should be discontinued or not:

Oso Blanco

Santa Marta

Revenue

$ 250

$ 450

Operating costs

Cost of service (variable)

250

305

Fixed costs

10

35

Total operating costs

$ 260

$ 340

Operating Profits

$ (10)

$ 110

6

Guanabacoa is a catering business. It currently serves two institutions; Oso Blanco and Santa Marta. The following information is about Guanabacoa's

revenues and costs for the previous year. Use differential analysis to determine if the Oso Blanco account should be discontinued or not:

Oso Blanco

Santa Marta

Revenue

$ 210

$ 480

Operating costs

Cost of service (variable)

212

250

Fixed costs

10

25

Total operating costs

$ 222

$ 275

Operating Profits

$ (12)

$ 205