Overview: The purpose of this assignment is to develop written communication skills to support managerial decision making. Students will use and interpret accounting data to support their decisions. Students must document their rationale for making each decision by referencing the appropriate facts and figures involved in this case. Grading: This assignment is worth 30 points and grading will be based on determining the right answer for each question and documenting the explanation in a very clear and concise writing style. Grammar will be assessed and graded, and typographical errors will be penalized. Please have a classmate or friend proof-read your document. Please type your responses in Word and email your document to me. Students are not allowed to share any answers or share any electronic documents. Please refer to the Academic Integrity Policy. Case: The Dial Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 3,000 sets per year. Annual cost data at full capacity follow: Direct Labor Advertising $117,000 $ 45,000 Factory Supervision $ 42,000 Property Taxes, factory building $ 4,500 Sales Commissions $ 75,000 Insurance, factory $ 2,400 Depreciation, admin office equip $ 4,200 Lease cost, factory equipment $ 15,000 Indirect Materials, factory $ 4,800 Depreciation, factory building $ 9,000 Admin office supplies (billing) $ 3,300 Admin office salaries $ 66,000 $ 96,000 $ 18,000 Direct Materials Used Utilities, Factory The patio sets are normally sold for $220 per set. Dial can increase capacity by 1,200 units, but must pay $128,000 to do so (No partial payment is allowed). If a special order is accepted, no sales commissions will need to be paid. Annual cost data for the production of 3,000 sets are classified as follows: Cost Behavior Cost Item Variable Fixed Selling & Admin Expense Direct Labor $117,000 Direct $117,000 Product Costs Indirect Advertising Factory Supervision $ 45,000 $ 42,000 $ 45,000 $ 42,000 Property Taxes, factory building $ 4,500 $ 4,500 Sales Commissions $ 75,000 $ 75,000 Insurance, factory $ 2,400 $ 2,400 Depreciation, admin office equip $ 4,200 $ 4,200 Lease cost, factory equipment $ 15,000 $ 15,000 Indirect Materials, factory $ 4,800 $ 4,800 Depreciation, factory building $ 9,000 $ 9,000 Admin office supplies (billing) $ 3,300 $ 3,300 Admin office salaries $ 66,000 $ 66,000 Direct Materials Used $ 96,000 $ 96,000 Utilities, Factory $ 18,000 $ 18,000 Total Cost $314,100 $188,100 $193.500 $213,000 $ 95,700 For the following questions, please use the information on pages 1 and 2 to help support your decisions. Please document your answer in a clear, concise way and reference any numbers that were used to make your decision. Each question is independent and refers to the original data unless specified otherwise. For each question, please use up to 100 words. Each question is worth 6 points. 1. 2. 3. 4. 5. Assume demand for 2022 is 1,800 units, what would be the minimum price that you would charge if you wanted to make a profit. Why is this the correct price? Please explain your calculations If demand for 2022 is instead 3,600 units, should the company pay to increase their capacity? Why? Please explain your calculations. Assume units are sold at the normal price. Assume demand is 2,980 units for 2022. If the company receives a special order for the next 20 units at $100 per set ($2,000 in total), would you accept this order? Why? Assume there is no better offer for the last ten units. Assume demand can be 4,200 units in 2022 if the company pays to increase their capacity and if the company does additional on-line advertising that would cost $15,000. Assume the normal selling price of $220 per set. Would you advise the company to pay to increase capacity and pay for the additional on-line advertising? Why? Please explain your calculations. Assume demand for 2022 is 3,200 units and you have decided that it is not worth it for Dial to expand production capacity. A competitor says that her company can supply you with 100 units for $10,000 and Dial can sell these units at the normal price. Will you advise Dial to take the offer and how does this compare to your own costs of making 100 additional units (do not consider the capacity expansion costs)?