Chapter 12 Relevant Costs for D xed cost of s6s0 If Fraser bypassed the wholesalers and cut its own paper for sale directly to would have to add equipment and personnel with an annual fixedri Incremental variable costs would be $0.10 per kilogram. Required Should Fraser cut its own paper or continue to sell to wholesalers? A firm makes two products frying pans and saucepans. Frying pans sell for 1 and t EXERCISE 12-18 Dropping a Product Line ILO2 $30 each and saucepans sell for $20 each. The variable cost of making a frying pan is $20 manufacturing costs the a of $1 million. cost of making saucepans is $8. The firm has additional Required 1. If the firm sells 100 more saucepans, what is the additional profit to the fi If the firm could sell either one more saucepan or one more fr would the firm prefer to sell? Why? ying pan, which 2. 3. Under what conditions would the firm want to drop frying pans from the pr EXERCISE 12-19 Make or Buy ILO21 Electric Scooter Co. makes motorized scooters for city commuters. The scooters can be using a regular household plug, and the batteries hold their charge for 24 hoursT turing plant is currently operating at 70% capacity. The plant manager is considering a facturing headlights for the scooters, which are currently being produced by anmu company and purchased by Electric Scooter for $11 each. Electric Scooter has theets and the workforce to produce the headlights. The engineers have suggested a variable cod .a manufac. equi pment $3 in direct la ou rand $4 in direct materials. The plant overhead rate is 200% of direct labor dollars, and 40% of the overhead is fixed cost. Required Should Electric Scooter make the headlights in-house? EXERCISE 12-20 Dropping a Product Line ILO2] A doughnut shop makes three basic types of doughnuts: cream filled, chocolate filled, and jam filled. The doughnut shop manager is analyzing the product mix and has collected the follow- ing information Chocolate Cream Jam Filled Filled Filled Sales price per dozen.... Direct cost per dozen. Fived overhcad per dozen 400$ (210) (040) (050) (00) 300 $250 (090) (200) 150 $ 160(050) The fixed costs are unavoidable and are allocated to each doughnut type ntity produced. The doughnut shop has excess capacity based on the