Question
Bergeron Corp. produces high-end pens (the pens include a hand-carved wooden handle). They currently produce 20,000 pens per week, although they have the capacity to
Bergeron Corp. produces high-end pens (the pens include a hand-carved wooden handle). They currently produce 20,000 pens per week, although they have the capacity to produce 23,000 pens per week. Manufacturing costs per unit are as follows:
Direct Materials | $1.42 |
Direct Labor | $3.18 |
Variable MOH | $0.91 |
Fixed MOH | $2.23 |
The pens sell for $11.15 per unit. There are no other fixed or variable costs associated with production and sale of these pens.
A customer has asked for a custom order of 6,000 pens per week at a price of $8.47 per pen. The special order requires a custom logo, which would add a new fixed cost of $561 per week.
How much would weekly operating profit change if Bergeron accepts the special order? Indicate an increase in profit as a positive number, and a decrease in profit as a negative number.
From 2021-2023, many industries across the world faced a shortage of computer chips. In particular, the auto industry faced a shortage of key chips needed to manufacture cars.
Below is hypothetical information for a car manufacturer, Niyonda. Before the chip shortage, the Niyonda produced and sold 558 sedans, 373 trucks, and 447 SUVs every week. Each vehicle required one specialized computer chip. Now Niyonda only has access to 640 computer chips per week and must decide how many of each product line to produce. Each vehicle requires 1 chip.
The United Auto Workers (UAW) union has threatened a major strike if the Niyonda tries to cut labor hours. Niyonda also cannot reduce its fixed overhead. However, materials, variable overhead, and selling expenses are variable in the short term.
Below is a segment income statement for Niyonda for the last week before the chip shortage began. Use the Theory of Constraints to maximize Niyonda's operating profit. The constraining factor is the number of chips. What will Niyonda's weekly operating profit be? Assume that per-unit revenue and variable costs remain the same and that total fixed costs remain the same. Also, assume that Niyonda can sell a maximum of 558 sedans, 373 trucks, and 447 SUVs every week.
Sedans | Trucks | SUVs | |
Units produced and sold | 558 | 373 | 447 |
Revenue per unit | 28,540 | 35,394 | 34,592 |
Direct materials per unit | 4,832 | 8,080 | 6,139 |
Direct labor per unit | 1,465 | 1,696 | 1,684 |
VOH per unit | 3,934 | 4,657 | 4,231 |
FOH applied per unit | 8,692 | 8,692 | 8,692 |
Selling expenses per unit | 1,258 | 1,258 | 1,258 |
Indicate an operating profit as a positive number. Indicate an operating loss as a negative number.
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