BUS 704 - HOMEWORK ASSIGNMENTS DUE SUNDAY OCTOBER 18 at 1 pm 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) Abbott Suit Corporation (ASC) manufactures BOTH nylon AND cotton jogging suits and this is its cost AND be able to sell your nylon suits for $250 (rather than $200). Do you take the offer? Why or why structure. not? Rent on MANUFACTURING facility $30,000 6. Abbott Cider Company makes Apple Cider > ONLY 1 PRODUCT. Here is its 2018 results: Salaries for CEO, cost accountant, administrative staff $10,000 a. Units produced: 10,000 gallons. Depreciation for MANUFACTURING facility $10,000 b. Apples used -> 100,000apples at $1/apple $50,000 C. 2 employees who work making the cider worked 4,000 ofh and were paid $20/dll. Erin Rogers, UW-M graduate, creates the following standards for the two jogging suits: d. Abbott paid the following bills: Nylon Jogging Suits Cotton Jogging Suits i. $1 of commission for each gallon of apple cider sold. Sid gly/suit | Sid prion input Sidigbo suit Sid prigg input ii. Abbott Sold 8,000 gallons of cider at $40/gallon. Direct Materials 2 andw/suit $10/y 3 yis/ suit $20 3d ili. Factory utilities of $40,000. Direct Labor 5 dlh/suit $10/du 4 dlh/suit $5/dlh iv. Factory rent of $10,000. VOH - utilities/grease 2 oth suit $10/oh 4 oh suit $10/0 v. Factory depreciation of $ 10,000. VOH - indirect labor 5 dlh/suit $10/dlh 4 dlh/suit $10/dth vi. Production supervisor salary of $20,000. vii. CEO/CFO salaries of $28,000. Assume the above standards are 100%% accurate and that nylon suits sell for $200, whereas cotton jogging suits PREPARE the 2018 Income statement using (2) Absorption costing (i.c. what we've been doing sell for $250. Answer the following questions: for the quiz and borneworks 1-4 for financial reporting) (b) CVP. 1. If there is no capacity issue with the sewing machine, which suit would ASC rather sell, nylon or cotton? Looking at the data I put below, I would say COTTON would be better to sell than Nylon. NYLON COTTON Std.qty/suit Sid.price/input TOTAL Std.qty/suit Std.price/input TOTAL DIRECT MATERIALS 2 yds/suit $10/yd $20 3 yds/suit $20/yd DIRECT LABOR 5 dih/suit $10/dlh $50 4 dih/suit $5/dih 520 VOH - utilities/grease 2 mh/suit $10/mh $20 4 mh/suit $10/mh $40 VOH - indirect labor 5 dih/suit $10/dlh $50 4 div/suit $10/dih $40 TOTAL $140 $200 $250 $140 $160 TOTAL PROFIT $60 $90 2. Assume that there IS a capacity issue, in that the sewing machine can ONLY work 3600 (about 10 hours 4 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. NYLON COTTON Contribution from 3.620 machine hours 3,4000 x 5140 N 800 5403 200,000 3.500 x $ 160 x 800 $460.800,000 Contribution per machine hour $403 200 090 / 1,600 $112,909 $460.800 090 / 1,400 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 machineylon suit and 2 machine hours per cotton suit!'. Do you take the offer? Why or why not? SHOW YOUR WORK