please find the contribution margin per unit in automatic and manual
please find total contribution margin from campaigns in automatic and manual
please find net change in OI for promotion campaign in automatic and manual please.
Case 3 - Marvin Co. For this case, review your lecture notes on Relevant Costing Marvin Co. manufactures both an automatic and a manual household dehumidifier. Exhibit 1 contains information on the price and cost per unit for both automatic and manual dehumidifiers. Exhibit I also contains production time for both products and capacity constraints. Because of limited demand, for several years, production has been at 80% of estimated capacity. Capacity is constrained by the number of machine hours available. Management wants to make use of the company's current excess capacity. Management has several independent strategies to utilize this excess capacity. For each independent strategy, conduct an incremental analysis to determine the net impact the strategy will have on operating income. Unless noted, all cells should only contain cell references. Then, make a suggestion to management on which strategy they should implement. Required: STRATEGY 3 - Increase domestic market sales with promotion campaign Marvin Co's marketing team believes that a targeted domestic marketing campaign could increase demand allowing them to sell units at regular prices. However, the marketing campaign would need to target EITHER manual units OR automatic units (not both). So, Marvin Co would need to decide whether to use all of its excess capacity to produce and sell manual units or to produce and sell automatic units. The promotion campaign would cost $235,000 to promote the manual model, but would only cost $225,000 to promote the automatic model. (You may hard code -- not cell reference - the two numbers contained in this paragraph.) In the PURPLE boxes, determine the net change in operating income if Marvin Co. adopts a domestic marketing campaign for automatic units. In the PINK boxes, determine the net change in operating income if Marvin Co. adopts a domestic marketing campaign for manual units. 2 Manual Strategy 3: Promotion Campaigns Automatic Contribution Margin per Unit Mult: Units produced from Excess Capacity 4,000 Total Contribution Margin from Campaigns Less: Cost of Campaign 225,000 Net Change in Ol for Promotion Campaign 10,000 235,000 Name: Exhibit 1: Data Automatic 350 Manual 150 Sales Price Per Unit Costs Direct Materials Direct Labor Variable MOH Fixed MOH Variable Operating Expenses Fixed Operating Expenses 65 35 68 50 RINI-I-NIR 32 25 16 18 21 13 52 30 Production Time (in Machine Hours) 2.5 1 Total Capacity (in Machine Hours) Excess Capacity (in Machine Hours) 50,000 10,000 Exhibit 2: Special Order Request Automatic 300 2,000 Special Price Quantity Manual 125 5,000 C Sa L. C Additional Fixed Cost 85.000
