Answer the following questions as required. SHOW ALL WORK! 1. Rays Corporation has received a request for a special order of 8.000 units of product A for $34.20 each. The normal selling price of this product is $35.70 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product A is computed as follows: Direct Materials 11.60 Direct Labor 2.20 Variable Manufacturing Overhead 7.10 Fixed Manufacturing Overhead 2.90 Unit Product Cost 23.80 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product A that would increase the variable costs by $6.30 per unit and that would require a one-time investment of $40,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order. 2. Glowster Company makes three products in a single facility. These products have the following unit product costs: Products Direct Materials 13.50 16.20 Direct Labor 14.10 18.00 Variable Manufacturing Overhead 3.10 3.60 Fixed Manufacturing Overhead 11.60 16.60 Unit Product Cost 42.30 54.40 Additional data concerning these products are listed below: Products 17.60 18.50 3.60 8.50 48.20 Mixing minutes per unit 3.30 3.80 5.10 Selling price per unit 59.30 73.20 64.60 Variable selling cost per unit 1.90 2.20 1.50 Monthly demand in units 1,000 1,000 4,000 The mixing machines are potentially the constraint in the production facility. A total of 27,400 minutes are available per month on these machines. Direct labor is a variable cost in this company. Required: a. How many minutes of mixing machine time would be required to satisfy demand for all three products? b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.) c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.) w 3. Timeland Corporation is considering dropping product B. Data from the company's accounting system Sales 360,000.00 Variable expenses 158,000.00 Fixed manufacturing expenses 119,000.00 Fixed selling and administrative expenses 94,000.00 All Tixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed selling and administrative expenses are avoidable if product B is discontinued Required: a. According to the company's accounting system, what is the net operating income earned by product B? b. What would be the effect on the company's overall net operating income of dropping product B7 Should the product be dropped? 4. Rockett Corporation is considering two alternatives that are code-named M and N. Costs associated with the alternatives are listed below: Alternative M Alternative N Supplies costs 31,000.00 $2,000.00 Assembly costs 33,000.00 33,000.00 Power costs 23,000.00 27,000.00 Inspection costs 15,000.00 21,000.00 Required: a. Which costs are relevant and which are not relevant in the choice between these two alternatives? WHY? b. What is the differential cost between the two alternatives? 5. June Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows: Direct Materials 53.60 Direct Labor 5.30 Variable Manufacturing Overhead 1.40 Fixed Manufacturing Overhead 13.20 Variable selling and administrative expense 1.60 Fixed selling and administrative expense 9.10 The normal selling price of the product is $91.60 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.00 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. Required: a. Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $81.90 per unit. By how much would this special order increase (decrease) the company's net operating income for the month? b. Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer? - Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the pecial order would require cutting back on production of 2,100 units for regular customers. What would be the minimum acceptable price per unit for the special order
