Exercises on relevant costs
Can you please provide a detailed breakdown of the calculations?
Exercise 1 Special order. activity-based costing The Winners Metal Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 1 1.000 medals each month. Current production and sales are 10.000 medals per month. The company normally charges $155 per medal. lCost information for the current activity level is as follows: Variable costs that vary with number of units produced Direct materials 5340.000 Direct manufacturing labor 365.000 Variable costs (for setups. materials handling, quality control, and so on] that vary with number of batches. 200 batches x $500 per batch Fixed manufacturing costs 310.000 Fixed marketing costs 235.000 Total costs 51.400000 Winners Metal hasjust received a special one-time-only order for 1.000 medals at $110 per medal. Accepting the special order would not affect the company's regular business. Winners Metal makes medals for its existing customers in ba tch sizes of 50 medals [200 batches x 50 medals per batch = 10.000 medals). The special order requires Winners Metal to make the medals in 25 batches of 40 medals. Requirement: 1. Should Winners Metal accept this special order? Show your calculations. For this section. you may wish to show your calculations in a separate spreadsheet. This work should be clearly labelled. e.g. 'Homework 4: Exercise 1 .1' and submitted in the platform along with this answer booklet. Write all final answers in the textboxes provided in this document. \fExercise 2 Relevant costs. contribution margin. product emphasis The Sand Store is a take-out Food store at a popular beach resorL Sandra Milles, owner of the Sand StoreI is deciding how much Freezer space to devote to Four diFFerent ice cream cups. Pertinent data on these Four ice cream cups are as Follows: Selling price per case S? 9.65 $2 I135 $26.45 $33.50 Variable cost per case $14.50 $15.95 $22.56! 52131] Cases sold per Foot oF shelF space 25 22 per day Milles has a maximum Front shetF space oF12 Feet to devote to the Four ice cream cups. She wants a minimum oF 1 Foot and a maximum oF 6 Feet oF Fcont shelf space For each ice cream. Requirement: 1. Calculate H1e contribution margin per case of each type of ice cream. E 2. A coworker oF Milles' recommends that she maximise the shelf space devoted to those ice creams with the highest contribution margin per case. Do you agree with this recommendah'on? Explain briey. 3. Should Peter's Pizza purchase the new even? Provide support For your answer. 4. Is there any conict between the decision model and the incentives of the manager who has pu rrhased 'ue \"old\" men and is considering replacing it a year later? 5. At what purchase price weuld Peter's Pizza he indifferent between purchasing the new even and can tinuing to use the old even? Exercise 4 Cost-plus target return on investment pricing Jeff Burns is the managing partner of a business 1at hasjust finished building a tin-room motel. Burns anticipates H'sat he will rent H'lese rooms for 16,000 nighE next year [or 16,000 room-nights]. All rooms are similar and Iwill rent for the same price. Burns estimates the following operating costs for nextyear. 1\"Variable operating costs 54.5 per room-night Salaries and wages 5200.000 Maintenance of building and pool other operating and ad ministration costs 126,000 Total filial cost: $3755!!!) The capital invested in Hue motel is $1,000,000. The partnership's target return on investment is 1556. Burns expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment. Requirement: '1. IWhat price should Burns charge for a room-night? 'What is the markup as a percentage of the full cost of a room-night? % 2. Burns' market research indicates that if the price of a roorrrnight determined in requirement 1 is reduced by 10%. the expected number of room-nights Burns could rent would increase by 10%. Should Burns reduce prices by 10%? Show your calculations li
