exercise 17.8

Classify the resources associated with the tanning salon (1) flexible (2) committed. Suppose that the tanning salon does very well and Roxanne decides to add one more tanning bed, using the third room at the back of the shop. What additional costs are relevant? Suppose that Roxanne decides to add two more tanning beds? How will your answer to (a) change? Special-Order Decision, Traditional analysis, Qualitative Aspects Feinan Sports. Inc., manufactures sporting equipment including weight-lifting national sporting goods chain recently submitted a special order for 4, 600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order's offering price of $12.80 per was below the cost to produce them. The controller was opposed to talking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be injured; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting is presented below. Direct materials $ 7.50 Direct labor 3.90 Variable overhead 1.60 Fixed overhead 3.10 Total $ 16.10 No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered. Required: Assume that the company would accept the order only if it increased total profits. Should the company accept or reject the order? Provide supporting computations. Suppose that Feinan Sports has negotiated with the potential customer, and has determined that it can substitute cheaper materials, reducing direct materials cost by $0.95 per unit. In addition, the company's engineers have found a way to reduce direct labor cost by $0.50 per unit. Should the company accept or reject the order? Provide supporting computations. Consider the personnel manager's concerns. Discuss the merits of accepting the order ever if it decreases total profits. Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43. producing 55,000 units annually The part is used in the production of several products made by Wehner. The cost per unit ft ABS-43 is as follows: Direct materials $45.60 Direct labor 9.80 Variable overhead 2.75 Fixed overhead 3.90