Hollings Company sells and delivers office furniture in the Rocky Mountain area. The costs associated with the acquisition and annual operation of a delivery truck are given below: Insurance $1,410 Licenses $230 Taxes (vehicle) $140 Garage rent for parking (per truck) $1,100 Depreciation ($8,000 5 years) $1,600* Gasoline, oil, tires, and repairs $0.06 per mile *Based on obsolescence rather than on wear and tear. The owner insists that all appropriate licenses and insurance be paid even if the truck is left in the garage. Requirement 1: Hollings Company has purchased one truck that has been driven 50,000 miles during the first year. Compute the average cost per mile of owning and operating the truck. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Average cost per mile $ Requirement 2: Hollings Company is unsure whether to use the truck or leave it parked in the garage and have all hauling done commercially. What costs are relevant in this decision? Variable operating costs (Click to select)IrrelevantRelevant Depreciation (Click to select)IrrelevantRelevant Automobile tax (Click to select)IrrelevantRelevant License costs (Click to select)RelevantIrrelevant Insurance costs (Click to select)IrrelevantRelevant _____________________________________________________________ For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the cost to produce the starters would be greater than the current $8.39 per unit purchase price: Per Unit Total Direct materials $2.93 Direct labor 2.62 Supervision 1.48 $72,520 Depreciation 0.93 $45,570 Variable manufacturing overhead 0.54 Rent 0.26 $12,740 Total production cost $8.76 A supervisor would have to be hired to oversee production of the starters. However, the company has sufficient idle tools and machinery that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $66,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: How much would profits per unit increase or decrease as a result of making the starters? (Input the amount as positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Profits would (Click to select)decreaseincrease by $ per unit _______________________________________________________________________ Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Product A B C Selling price $125 $105 $115 Variable expenses: Direct materials 37.50 31.50 8.05 Other variable expenses 37.50 47.25 72.45 Total variable expenses 75.00 78.75 80.50 Contribution margin $50.00 $26.25 $34.50 Contribution margin ratio 40 % 25 % 30 % -------------------------------------------------------------------------------- Demand for the company's products is very strong, with far more orders each month than the company can produce with the available raw materials. The same material is used in each product. The material costs $5 per pound with a maximum of 5,000 pounds available each month. Required: (a) Compute contribution margin per pound of materials used. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Contribution margin Product A $ Product B $ Product C $ -------------------------------------------------------------------------------- (b) Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third? Product A (Click to select)FirstThirdSecond Product B (Click to select)FirstSecondThird Product C (Click to select)ThirdFirstSecond