Agriproducts Corporation grows corn in rural areas of the South. Agriproducts's costs per bushel of corn (based on an average yield of 130 bushels per acre) follow: Direct material $1.10 Direct labor 0.40 Variable overhead 0.30 Fixed overhead 0.60 Variable selling costs 0.10 Fixed selling costs 0 Agriproducts defines direct material costs as seed, fertilizer, water, and other chemicals. The variable overhead costs represent maintenance and repair costs of machinery. The fixed overhead costs are completely comprised of depreciation expense on machinery and real estate taxes. 1. Refer to Agriproducts Corporation. Assume that the current date is March 15. On this date, Agriproducts must make a decision as to whether it is financially better off to plant a certain farm with corn or leave the land idle (no income is derived from idle land). Corn prices have been severely depressed in recent years and Agriproductss best guess is that corn prices will be around $2.00 per bushel at the time the crop is ready for harvest. Should the company plant corn or leave the land idle? Explain. 2. Refer to Agriproducts Corporation. Assume for this question only that the company decided to plant the corn. A local oil refiner has approached the company about converting the crop to grain alcohol (used to make gasohol) rather than selling the grain to the local grain elevator. If Agriproducts converts the grain to alcohol, it will incur additional costs of $0.60 per bushel, and the company will be able to sell the crop to the oil refiner for the equivalent of $2.60 per bushel. Otherwise, the company can sell the corn crop to the local grain elevator for $1.85 per bushel. If Agriproducts elects to sell the grain to the refinery, the company will not incur the variable selling costs. What should the company do? Support your answer with calculations. 3. Refer to Agriproducts Corporation. Assume that the current date is March 15. On this date, Agriproducts Corporation must make a decision as to whether it is financially better off to plant a certain farm to corn, leave the land idle (no income is derived from idle land), or rent the land to another farmer for $50 per acre. Corn prices have been severely depressed in recent years and Agriproducts Corporation's best guess is that corn prices will be around $2.00 per bushel at the time the crop is ready for harvest. What should the company do? Show calculations. 4. New Iberia Corporation makes and sells the "Tabasco Maiden, a wall hanging depicting a magical pepper plant. The Tabasco Maidens are sold at specialty shops for $50 each. The capacity of the plant is 15,000 Maidens per year. Costs to manufacture and sell each wall hanging are as follows: Direct material $ 5.00 Direct labor 6.00 Variable overhead 8.00 Fixed overhead 10.00 Variable selling expenses 2.50 New Iberia Corporation has been approached by a Texas company about purchasing 2,500 Tabasco Maidens. The company is currently making and selling 15,000 per year. The Texas company wants to attach its own Lone Star label, which increases costs by $.50 each. No selling expenses would be incurred on this order. The corporation believes that it must make an additional $1 on each Tabasco Maiden to accept this offer. a. What is the opportunity cost per unit of selling to the Texas company? b. What is the minimum selling price that should be set? 5. Mighty Mikes Accounting Service provides two types of services: audit and tax. All company personnel can perform either service. In efforts to market its services, Mighty Mike relies on radio and billboards for advertising. Information on Mighty Mike's projected operations for the coming year follows: Audit Taxes Revenue per billable hour $35 $30 Variable cost of professional labor 25 20 Material cost per billable hour 2 3 Allocated fixed costs per year 100,000 200,000 Projected billable hours 14,000 10,000 a. What is Mighty Mikes projected profit or (loss)? b. If $1 spent on advertising could increase either audit services billable time by 1 hour or tax services billable time by 1 hour, on which service should the advertising dollar be spent