Ch 8 2 nd Day Homework Big Company makes several products, but is considering dropping its line of stereos Last year sales were $2,000 and variable costs included direct materials ($400), direct labor ($500), variable overhead ($300), and variable SG A ($200) Total fixed costs are $850 of which $400 are direct and $450 indirect fixed costs Should Big Co discontinue production of stereos Lekker Company has already manufactured 20,000 gallons of raw milk at a cost of $1 per gallon The 20,000 gallons can be sold at this stage for $40,000 Alternatively, it can be processed further for an additional cost of $15,000 and converted into 1,000 gallons of cream and 19,000 gallons of skim milk The sales price for the cream is $15 per gallon and the sales price of the skim milk is $2 50 per gallon Should Lekker Company process further or not Multi Company can sell all of the units of furniture it produces, but it has limited production capacity It can produce 7 chairs or 2 couches per hour and it has 6,000 production hours available Contribution margin for the chairs is $40 and for the couches $120 What is the most profitable sales mix in units What if there is only a demand for 28,000 chairs What is the total contribution margin at the most profitable sales mix Woodys Tennis Racket Company is considering purchasing a new machine to string tennis rackets The current machine cost $40,000, has accumulated depreciation of $25,000, could be sold today for $8,000, and has annual operating costs of $9,000 The new machine costs $45,000 Annual operating costs for the new machine are expected to be $5,000 Both the new and old machine have an expected life of 10 years At the end of the 10 years, neither machine is expected to have any salvage value Should Woodys keep the old machine or purchase a new machine

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Ch 8 - 2 nd Day Homework: Big Company makes several products, but is considering dropping its line of stereos. Last year sales were $2,000

Ch 8 - 2^nd Day Homework:

Big Company makes several products, but is considering dropping its line of stereos. Last year sales were $2,000 and variable costs included direct materials ($400), direct labor ($500), variable overhead ($300), and variable SG&A ($200). Total fixed costs are $850 of which $400 are direct and $450 indirect fixed costs. Should Big Co. discontinue production of stereos?

Lekker Company has already manufactured 20,000 gallons of raw milk at a cost of $1 per gallon. The 20,000 gallons can be sold at this stage for $40,000. Alternatively, it can be processed further for an additional cost of $15,000 and converted into 1,000 gallons of cream and 19,000 gallons of skim milk. The sales price for the cream is $15 per gallon and the sales price of the skim milk is $2.50 per gallon. Should Lekker Company process further or not?

Multi Company can sell all of the units of furniture it produces, but it has limited production capacity.

It can produce 7 chairs or 2 couches per hour and it has 6,000 production hours available. Contribution margin for the chairs is $40 and for the couches $120. What is the most profitable sales mix in units? What if there is only a demand for 28,000 chairs? What is the total contribution margin at the most profitable sales mix?

Woodys Tennis Racket Company is considering purchasing a new machine to string tennis rackets. The current machine cost $40,000, has accumulated depreciation of $25,000, could be sold today for $8,000, and has annual operating costs of $9,000. The new machine costs $45,000. Annual operating costs for the new machine are expected to be $5,000. Both the new and old machine have an expected life of 10 years. At the end of the 10 years, neither machine is expected to have any salvage value. Should Woodys keep the old machine or purchase a new machine?