QUESTION 2: What kind of problem is this? The constraint at Lawson Toy Corporation is time on a cutting machine. The company makes three products that use this machine. Data concerning those products appear below: Teddy Bears Raggedy Ann Dolls Stuffed Dog Selling Price per unit $ 19.20 $ 54.27 $22.28 Variable Cost $ 15.87 $42.05 $16.76 per Unit 3.20 8.60 3.60 Minutes on the cutting machine Expected sales 800 500 900 Required: 1) How many minutes per month would the company need to produce all of the toys they expect to sell 2) The cutting machine is scheduled for maintenance during October thus reducing the number of minutes available for culling during the month to 9.600 minutes. Based on your answer to number 1. will Lawson be able to cut all of the necessary pieces to produce their expected sales volume. How many minutes will they be short? 3) Calculate the highest contribution margin the company can expect in October due to this constraint. (Round all mins and dollar amounts to two decimal places. Round all totals to the whole unit) QUESTION 1: What kind of problem is this? Ferrera Fisher Froehlich and Frostrum (4F) is a manufacturing firm One of their products is a paddleboat 4F has always made the rudder for the paddleboat in-house. A total of 11,000 paddleboat rudders are produced and used every year. The company's Accounting Department reports the following costs of producing the rudders at this level of activity Per unit Direct Materials $5.90 $ 1.70 Direct Labor Variable Manufacturing Overhead Supervisor's Salary Depreciation of Special Equipment Allocated General Overhead $ 5.40 $ 2.60 $ 3.20 $ 3.30 Howell Engineering has offered to make the rudders and sell it to 4F for $21.20 each If this offer is accepted the supervisor's salary and all of the variable costs, including the direct labor, can be avoided The special equipment used to make the rudders was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the rudders were purchased instead of produced internally. In addition the space used to make the rudders could be used to make more of one of the company's other products, generating an additional segment margin of $29,000 per year for that product Required: See below 1. What would be the impact on 4F's overall net operating income if they bought the rudders from Howell Engineering? 2. Based on your answer to (1) should 4F purchase the rudders from Howell or continue manufacturing them in house? Why or why not? (10 points) 3. What other factors should 4F consider when making the decision of whether or not they should contract out the production of the rudders to Howell Engineering? 5 points)
