Abbott Suit Corporation (ASC) manufactures BOTH nylon AND cotton jogging suits and this is its cost structure.

Rent on MANUFACTURING facility$30,000

Salaries for CEO, cost accountant, administrative staff$10,000

Depreciation for MANUFACTURING facility$10,000

$50,000

Erin Rogers, UW-M graduate, creates the following standards for the two jogging suits:

Nylon Jogging Suits

Cotton Jogging Suits

Std.qty/suit

Std.price/input

Std.qty/suit

Std.price/input

Direct Materials

2 yds/suit

$10/yd

3 yds/suit

$20/yd

Direct Labor

5 dlh/suit

$10/dlh

4 dlh/suit

$5/dlh

VOH - utilities/grease

2 mh/suit

$10/mh

4 mh/suit

$10/mh

VOH - indirect labor

5 dlh/suit

$10/dlh

4 dlh/suit

$10/dlh

Assume the above standards are 100% accurate and that nylon suits sell for $200, whereas cotton jogging suits sell for $250. Answer the following questions:

1.If there is no capacity issue with the sewing machine, which suit would ASC rather sell, nylon or cotton?

2.Assume that there IS a capacity issue, in that the sewing machine can ONLY work 3600 (about 10 hours a day) hours (or it will break). Also, assume that annual demand for nylon suits is 800 and annual demand for cotton is also 800. What is the optimal product mix in terms of making/selling nylon and cotton suits?SHOW YOUR WORK.

3.Use your answer to #2 to create the 'status quo'.Fischer machine comes up with the following offer 'hey, we can RENT you an extra sewing machine for $4,000 and it has a capacity of another 3,600 hours!'. Do you take the offer?SHOW YOUR WORK.

4.Use your answer to #2, to create the 'status quo'. Swenson Oil Company approaches Abbott Company with the following offer 'IF you pay us $3,000, our oil will allow your company to reduce the machine hours per nylon suit to 1 machine/nylon suit and 2 machine hours per cotton suit!'.Do you take the offer?Why or why not? SHOW YOUR WORK.

5.Use your answer to #2, to create the 'status quo'. McCarthy nylon company comes up with the following offer 'hey, if you buy OUR nylon at $20/yard, you can advertise this (at $1,000 per year) AND be able to sell your nylon suits for $250 (rather than $200). Do you take the offer? Why or why not?

6.Abbott Cider Company makes Apple Cider=> ONLY 1 PRODUCT. Here is its 2018 results:

a.Units produced: 10,000 gallons.

b.Apples used => 100,000apples at $1/apple

c.2 employees who work making the cider worked 4,000 dlh and were paid $20/dlh.

d.Abbott paid the following bills:

i.$1 of commission for each gallon of apple cider sold.

ii.Abbott Sold 8,000 gallons of cider at $40/gallon.

iii.Factory utilities of $40,000.

iv.Factory rent of $10,000.

v.Factory depreciation of $10,000.

vi.Production supervisor salary of $20,000.

vii.CEO/CFO salaries of $28,000.

e.PREPARE the 2018 Income statement using (a) Absorption costing (i.e. what we've been doing for the quiz and homeworks 1-4 for financial reporting) (b) CVP.