Information regarding the selling prices and unit costs of three products is as follows: Product Selling price Variable costs Fixed costs Milling machine time (minutes) F G H $95 $75 $105 $ 70 $ 60 $ 75 $ 15$ 6 $ 12 19 5 5 Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The milling machine is the constraint, with only 2700 minutes of milling machine time available this week. Required: a. Given the milling machine constraint, what should the company focus on to make the production decision? b. Based on your answer to part (a), calculate that amount for each product. c. Which product should be emphasized? The product on decision should be made by analyzing the b. Based on your answer to part (a), calculate that amount for each product Product Product G Product HD c. Product that should be emphasized Product X and Y are made from a common input. Joint processing costs up to the split-off point total $51,300 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below. Allocated joint processing costs Sales value at split-off point Costs of further processing Sales value after further processing Product X $ 20,000 $ 24,400 $ 24,500 $ 48,400 Product Y $ 31,300 $ 38,400 $ 18,800 $ 58,980 Total $ 51,3ee $ 62,800 $ 43,388 $107,300 Required: a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be Indicated by a minus sign.) b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? (Negative amount should be Indicated by a minus sign.) a Larson, Inc. has received a request for a special order of 8.400 units of product A276 for $45 30 each. The normal unit product cost of product A276 is as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $16.10 5.40 2.60 5.se $29.60 The normal selling price of A276 is $50.40 each, but the units would need to be modified slightly for the customer. Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product A276 that would increase the variable costs by $5.00 per unit and that would require a one-time investment of $44,800 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order. A company is considering the following investment projects. (Ignore income taxes): Investment required Present value of cash inflows Projecte $ 82,400 $ 90,064 Project R $125,900 $145, 084 Projects $ 235,500 $258,175 The only cash outflows are the initial investments in the projects. Required: Rank the investment projects using the project profitability index. Rank 1 Rank 2 Rank 3
