Question
1.Lusk Corporation produces and sells 14,400 units of Product X each month. The selling price of Product X is $26 per unit, and variable expenses
1.Lusk Corporation produces and sells 14,400 units of Product X each month. The selling price of Product X is $26 per unit, and variable expenses are $20 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $101,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be:
rev: 07_07_2020_QC_CS-218335
A.($43,600)
B.$43,600
C.$14,600
D.($57,400)
2.The Cook Corporation
The SP Corporation mat-res 40.000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $10.50 Direct labor $ 0.50 Variable manufacturing overhead 3 3.05 Fixed manufacturing overhead $ 4.00 ' An outside supplier recentigl.r began producing a comparable motor that couid be used in the sewing machine. The price offered to SP Corporation for this motor is $20.05. If SP Corporation decides not to make the motors. there would be no other use for the production facilities and none ofthe xed manufacturing overhead cost oould be avoided. Direct labor is a variable cost in this company. The annual nancial advantage {disadvantage} for the co mpanv as a result of making the motors rather than buying them from the outside supplier would be: The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales $931, 090 Variable expenses $409, 500 Fixed manufacturing expenses $345, 900 Fixed selling and administrative expenses $252, 900 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $211,500 of the fixed manufacturing expenses and $122,500 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. What would be the financial advantage (disadvantage) from dropping product D74F?An automated turning machine is the current constraint at Jord'lson Corporation. Three products use this constrained resource. Data concerning those products appear below: . . Lu as are Selling price per unit $161.22 $353.32 $433.25 1llarialzrle cost per unit $113.94 $241.42 $342.32 Minutes on the constraint 2.33 6.53 3.33 Rank the products in order of their current protability from most profitable to least protable. In other words. rank The products in the order in Iwhich they should be emphasized. {Found your intermediate calculation: to ldaclrrlal places.) Lahdor Appliance Corporation makes and sells electric fans. Each fan reg uiariv sells for $3}. The following cost data per fan is based on a full capacity,r of l fans produced each period. lilirect materials filial Direct labor 5 9 Manufacturing overhead [5% variable anr.l 53$ unavoidable fixed] 33 B A special order has been received by Landor for a sale ofl fans. to an overseas customer The only selling costs That would be incurred on this order would be $3 per fan for shipping. Landor is novlI selling 124.000 fans through regular channels each period. Assume that direct labor is an avoidable cost in ma. decision. What should Landor use as a minimum selling price per fan in negotiating a price for This special order? Polaslti Company manufactures and sells a single product called a Pet Operating at capacity. the company can produce and sell 48.000 Pets per year. Costs associated with this level of production and sales are given below: Linit Total Direct materials 5 20 i 050,.W0 Direct labor a 384,030 Variable manufacturing overhead 3 Ila-1,000 Fined nanuFactur-ing overhead '1 same-an 'u'ariable selling expense a 192,000 Fixed selling expense 5 233.000 Total cost $ 11%| 3 2,304,030 ' The Pets normally sell for $53 each. Fixed manufacturing overhead is $330000 per year within the range of42.000 through 43.000 Pets per year. Pequlrod: 1. Assume that due to a recession. Polaslti Company expects to sell only 42.000 Pets through regular channels next year. A large retail chain has offered to purchase 0.000 Pets if Polaslti is willing to accept a 10% discount olfthe regular price. There would be no sales commissions on this order: thus. variable selling expenses would be slashed by T505; However. Polaslti Company would have to purchase a special machine to engrave the retail chain's name on the 5.000 units. This machine would cost $11000. Fola slti Company has no assurance thatthe retail chain will purchase additional units in the future. IWhat is the nancial advantage [disadvantage] of accepting the special order? [Pound your Intermediate calculatlon: to 2 decimal places] 1 Refer to the original data. Assume again that Polaslti Company expects to sell only 42.000 Pets through regular channels next year. The U3. Army would like to ma lte a one-time-only purchase of 0.000 Pets. The Army would pay a xed fee of$1.40 per Pet. and it would reimburse Polaslti Company for all costs of production {variable and xed] associated with the units. Because the army would pick up the Pets with its own trucks. there would be no variable selling expenses associated with this order. What is the nancial advantage {disadvantage} of accepting the U5. Army's special order? 3. Assu me the same situation as described in {2] above. except that the company expects to sell 40.000 Pets through regular channels next year. Thus. accepting the LLB. Army's order would require giving up regular sales of 6.000 Pets. Given this new information. what is the nancial advantage [disadvantage] ofaccepting the LLB. Annfs special order? a tna'noi ad'ursl'llage 2. manoisladvsl'llage a manoisll[disadvantage] Supler Corporation produces a part used in the manufacture of one of its products The unit product cost is $22. computed as follows: Direct materials $ Direct labor 1I.|"arial:rle manufacturing overhead Fixed manufacturing overhead Unit product cost $22 'LHUJ'Hl'h-l l An outside supplier has offered to provide the annual requirement crf33L'lID ofthe parts for only.r $14 each. The company estimates that 30% of the fixed manufacturing overhead cost above could be eliminated ifthe parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data. the nancial advantage {disadvantage} of purchasing the parts from the outside supplier would he: The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: Sales $927 , 900 Variable expenses $406, 000 Fixed manufacturing expenses $341, 900 Fixed selling and administrative expenses $248, 000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $208,000 of the fixed manufacturing expenses and $119,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued. According to the company's accounting system, what is the net operating income (loss) earned by product D74F? Include all costs in this calculation-whether relevant or not.Bruce Corporation makes four products in a single facility. These products have the following unit product costs: Products A B C D Direct materials $14.50 $10.40 $11. 20 $10.80 Direct labor 19.60 27.60 33.80 40.60 Variable manufacturing overhead 4.50 2.90 2.80 3.40 Fixed manufacturing overhead 26.70 35.00 26.80 37.40 Unit product cost $65.30 $75.90 $74.60 592.20 Additional data concerning these products are listed below. Products A B C D Grinding minutes per unit 4.09 5.50 4.50 3.60 Selling price per unit $76.30 $93.70 $87.60 $104.40 Variable selling cost per unit $ 2.40 $ 1. 40 $ 3.50 $ 1.80 Monthly demand in units 4, 200 | 4, 200 | 3, 290 2, 200 The grinding machines are potentially the constraint in the production facility. A total of 53,800 minutes are available per month on these machines. Direct labor is a variable cost in this company. How many minutes of grinding machine time would be required to satisfy demand for all four products?Mcfarlain Corporation is presently making part U98 that is used in one ofits products A total of 13.006 units ofthis part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per _ _ IUnit Direct materials $3.53 Direct labor $4.93 Variable overhead $1.93 Supervisor's salary $5.43 Depreciation of special equipment $5.48 Allocated general overhead $5.?B ' An outside supplier has offered to produce and sell the part to the company for $23.34} each. If this offer is accepted. the supervisor's salary and all ofthe variable costs. including direct labor. can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents xed costs of the entire company. none of'uvhich would be avoided ifthe part were purchased instead of produced intemally. In addition to the facts given above. assume that the space used to produce part U98 could be used to make more of one ofthe company's other products. generating an additional segment margin of $61.30D per year for that product. What would be the nancial advantage {disadvantage} of buying part U93 from the outside supplier and using the freed space to make more ofthe other product? \fEallerani Corporation has received a request for a special order of 5.100 units of product A90 for $23.60 each. Product AQD's unit product cost is $23.05. determined as follows: Direct materials $ 3.413 Direct labor 3.13 1I.l'arial:+le manufacturing overhead EBB Fixed manufacturing overhead 3.15 Unit product cost $23.65 ' Assume that direct labor is a variable cosL The special order would have no effect on the compa nv's total fixed manufacturing overhead costs. The customer would like modications made to product A90 that would increase the variable costs try $4.90 per unit and that would require an investment of$16DOG in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The co mpany has ample spare capacity for producing the special order. The annual nancial advantage {disadvantage} for the company as a result of accepting this special order should be: Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below: Alternative Alternative A B Materials costs $ 39,090 $ 52,100 Processing costs $ 35, 890 $ 35 ,890 Equipment rental $ 12, 400 $ 12, 490 Occupancy costs $ 14,090 $ 20,900 What is the financial advantage (disadvantage) of Alternative B over Alternative A?The constraint at Rauchwerger Corporation is time on a particular machine. The companyI makes Three products that use this machine. Data concerning those products appear below: _ _ HI __ no FS-__ Selling price per" unit $335.29 $223.48 $199.23 Variable cost per" unit $259.22 $1?3.B4 $159.5? Minutes on the constraint ma 4.53 5.23 ' Assu me that sufcient time is available on the constrained machine to satisfy demand for all but the least protable product Up to how much shoulci the company be willing to pay to acquire more oftlne constrained resource?r [Round your Intermediate elieulvetlon: to 2 deelmel pieces.) A customer has requested that Lewelling Corporation ll a special order for 2,200 units of product 54? for $33 a unit While the product would be modied slightly forthe special order. product S-'l-Ts normal unit product cost is $16.90: lltirecl: materials $ 4.53 Direct labor 4.433 Variable manufacturing overhead 1.?El Fixed manufacturing overhead 5.63 Unit product cost $15.93 ' Assu me that direct la loor is a variable cost. The special order would have no effect on the company's total xed manufacturing overhead costs. The customer I.vould like modications made to product 54? that would increase the variable costs by $1.9!) per unit and that Ilvould require an investment Uf$15 in special molds that would have no salvage value. This special order I.vould have no effect on the company's other sales. The company has ample spare capacityI for producing the special order. The annual nancial advantage {disadvantage} for the company as a result of accepting this special order should beStep by Step Solution
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