Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise Plant manufactures and distributes two pounds, standard and commercial, under the Super Clean label. The forecasted operating results for the first six months of the current year, when 150,000 cases of each compound are expected to be manufactured and sold. Forecasted Results of Operations or the Six- thousands ning June 30 sales standard $12 , 080 .9 $19 50 cost of goods sold 6, 309.0 7,950.9 14, 259. $ 1, 208.0 3 4, 050.0 Selling and administrative expenses : $ 5,250.8 variable Fixed* 1,580.8 5 2,480.8 5 3,980.8 Total selling and administrative expenses 2 , 346 .8 1,354.8 2, 280 .8 Income (loss) before taxes (1, 146.0 ) The fixed selling and administrative expenses are allocated between the two products on the basis of dollar sales volume. The standard compound sold for $50 a case and the commercial compound sold for $80 a case during the first six months of the year. The manufacturing costs, by case of product, are presented in the schedule below. Each product is manufactured on a separate production line. Annual normal manufacturing capacity is 300,000 cases of each product. However, the plant is capable of producing 350,000 cases of standard compound and 450,000 cases of commercial co ost per case Direct material variable manufacturing overhead Fixed manufactu Total manufacturing cost Variable selling and administrative costs 510.80 3 16. 80 'Depreciation charges are 50 percent of the fixed manufacturing overhead of each line. s for the the reflects the consensus of top manageme year whenagement regarding the price-volume alternatives for the Super Clean months of the year, roducts for the last six months of the current year. These are essentially the same alternatives management had during the first six Alternative Prices Sales V (per case) sales Volume Alternative Prices Sales Volume (per case) 110, 080 562 ( in cases ) 156 , 080 2 4 8 Gargantuan's top management believes the loss for the first six months reflects a tight profit margin caused by Intense competition. Management also believes that many companies will leave this market by next year and profit sh Required: 1. What unit selling price should Gargantuan Industries select for each of the Super Clean compounds for the remaining six months of . independently of your answer to requirement r the last six mont commercial compound. Calculate the conghung standard compound, and a selling price of $80 and volume of 45,000 cases for the 2-b. Given the scenario in requirement (2-a), should management consider closing down its operations until January 1 of the next year in order to minimize its losses? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B What unit selling price should Gargantuan Industries select for each of the Super Clean compounds for the remaining six Selling Price Standard compound per case Commercial compound per case Req 1 Req 2A Req 28 Independently of your answer to requirement . quirement (1), assume the optimum alternatives for the last six months were as follows: a cases for the com decimal pine commercial compound. Calculate the contribution margin. (Enter your answers in thousands rounded to 1 Show less A GARGANTUAN INDUSTRIES BOISE PLANT Projected Contribution Margin For the Six-Month Period Ending December 31 (in thousands) Standard Commercial Total Variable costs: Selling and administrative Manufacturing Total variable costs Contribution margin Reg 1 Req 2A Req 28 Given the scenario in requirement (2-a), should management consider closing down its operations until January 1 of the next year in order to minimize its losses? Should management consider closing down its operations until January 1 of the next year in order to minimize its losses
