Appendix 4-A PT Toys makes 20.000 units per year of a protective mattress around the springs of their trampe The unit product cost of this part is computed as follows: and the springs of their trampolines. Direct materials $25.10 Direct labour 18.20 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost An outside supplier has offered to sell the company the protective pad for $56.00 a unit. If PT Toy accepts this offer, the facilities now being used to make the pads could be used to make new product that is in high demand. The additional contribution margin on this other product would be $50,000 per year. If the pad were purchased from the outside supplier, all of the direct labour cost of the pad would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the pad would continue even if the pad were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Required: a. How much of the unit product cost of $59.10 is relevant in the decision of whether to make or buy the part? b. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it? c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 20,000 units required each year? Appendir Appendix 4.8 ano ed the toy store opened a small coffee shop Peoplerave When I first started the toy store made daily by hand, using only fresh ingredi looks like my soups are losing me money, PT Toys is located near a large office comple on a daily basis. I'm certain that it creates spin have for you: ed a small coffee shop. People rave about the soups as they are "gredients. I know people come just for the soups. However, it think I want to drop that line from the menu. Should I? ce complex. There is a lot of foot traffic that comes by the toy store at it creates spin off revenue in the toy store. Here's the information Sales VC as a % of sales Fixed Expenses Sandwiches 150,000 80.00% 10,000 Pastries 95,000 74.00% 20,000 Soup 175.000 85.00% 65,000 Beverages 195,000 64.00% 50,000 d from the menu. I think it will have a ripple effect on the rest of the items. Specifically: There would be a 15% loss in sandwich revenue There would be a 5% gain in Beverage revenue A 10% increase in cookie sales also allocate $30,000 if fixed costs to the soup department and this would be saved if we drop the line. Required: Comment if Priyan should drop soup from his menu. Appendix 4-C PT Toy manufactures bikes. The company currently sells one particular bike for $100.00. A customer na approached Priyan and would like to make a special order for 2.000 bikes. Due to the large order, the client would like a discount and offered to pay $60.00 per bike. Privan is trying to determine if they should accept the special order. PT toy sells 24.000 bikes per year and has the capacity to produce 25,000 bikes. The company has provided information on costs to produce the bikes as follows: Per Unit Direct Materials $30 Direct Labour $10 Manufacturing Overhead The variable portion of the manufacturing overhead is $12 per unit. The order would have no effect on the company's total fixed manufacturing overhead costs. If the special order is accepted, the company would not be able to fulfill all of its regular customer sales. Required: Should the company accept the special order
