100% 442 Student Assignment 7 F19 - Saved to my Mac View es Mailings Review AO E 21 AalbCode AaBbCcD AaBbCcDdE Emphasis AaBbcc Strong Heading 1 Normal 1) Greg was talking to his neighbour one day and the conversation turned to the neighbour's very large, very old tree that was apparently dead. The neighbour was concerned that the tree would fall on his house, causing major damage. Greg immediately saw an opportunity to make some extra cash. He offered to have the tree removed if he could keep the wood from the tree. The neighbour agreed Greg paid $5,000 to an arborist to cut the tree down, and slice it into "cookies, i.e. cross sections of the trunk about three inches thick. The tree yielded 70 cookies. Greg planned to attach legs to the cookies and sell them as live-edge coffee tables. To dry the cookies properly, Greg stored them in a climate-controlled facility that he rented for $100 per month. Greg planned to store the cookies for three months, but he became busy and three months stretched into 14 months. When Greg finally examined the cookies, he found that seven of them did not dry properly and were useless. Even worse, he had to pay $100 to dispose of the rejected cookies After considerable research, Greg determined that he could sell live-edge coffee tables for an average of $1,100 each. In addition to the costs he had already incurred, he would also have the following costs per table: Sanding SSO Varnishing Cost of legs including installation Delivery Erin was one of the contacts that Greg had made in his research. She offered to buy all the cookies for a total of $56,700. Erin would pay any shipping costs incurred. Should Greg sell the cookies, or make them into tables? Focus E Emphasis Heading 1 Normal 2) Erin, from question 1), produces live-edge tables full-time. Accordingly, she has equipment that allows her to reduce her per unit costs. Erin has calculated her cost per table as follows: Sanding Varnishing Cost of legs including installation Delivery Depreciation on equipment Factory rent - Insurance on factory Plus the cost of the cookie If Erin can sell a finished live-edge table for $1,100 on average, what is the most she would be willing to pay Greg for the cookies? 3) In addition to tables, Erin also manufactures and sells chairs and stools. The following was her income statement for the proceding year Revenue Variable Costs Contribution Margin Traceable Fixed Total $410,000 $100.000 $110,000 Tables $225,000 125.000 $50,000 Chairs $125.000 80.000 $45.000 Stools $40.000 45.000 $15.000 Costs Division Income Common Fixed Costs Operating Income $18.000 $72.000 $60.000 S12.000 12.000 $38,000 32.000 55.000 15.000 10,000 18.300 SULZL 11.000 $4.000 8.800 54.800 If Erin had not produced and sold stools last year, what effect would it have had operating income for her company? Stools S60 Erin has the following information: Tables Chairs Sales Price $225 $125 Variable Costs Contribution Margin $50 $45 DLH perunt S15 Erin does not have enough DLH to produce enough tables, chairs and tools to meet demand, in which order should she produce the items? Focus E
