PROBLEM E: AWARD PLUS Award Plus manufactures medals and trophies for winners of athletic competitions and other contests. Award Plus's manufacturing plant has ie capacity to produce 10,000 medals per month. Currently, Award Plus is operating at 75% of available capacity, producing 7,500 medals per month. Pertinent data for this level of operations follows: Medals produced and sold ?'.500 Sellin_ nice $175 - er medal Manufacturin_ $46 er medal Marketim 8.1 administrative $34 1 er medal Variable costs: Direct materials $50 per medal Directlabor $40 uer medal Prot $5 er medal ' Award Plus calculates xed costs per medal by dividing the annual xed cost bytlre number of medals it expects to produce duringthe year. Recently, Award Plus received an inquiry from a national Little League baseball organization about the possibility of producing 1,300 medals next month. The Little League organization plans to give the medals to the winners ofthe upcoming state tournaments. Sinoe there are 50 states, 3 age brackets, and approximately 12 players per team, the organization needs 1,300 medals [i.e., 1,300 = 50 * 3 * 12]. The Little League organization, however. indicates that they are somewhat strapped for cash and can only pay $100 for each medal. REQUIRED a. By how much will Award Plus's prot increase or decrease ifit accepts the special order? Please show all your calculations. b. Assume thatAwaod Plus's manufacturing plant has the capacityto produce only 9,000 medals per month rather than 10,000 medals per month. This means that if Award Plus accepts the special order, it will have to forego sales of 300 medals to its regular customers [i.e.. the special order carrnotbe partially fullled]. How does this information affect your answer to part {b}? That is, by how much will Award Plus' prot increase or decrease if it accepts the special order when plant capacity is only 9,000 medals? PROBLEM 3: 'CRASH' [OHNSDN i"Crash'I Iohnson manages the LEGOsquare-foot video arcade and game center at a popular mall. Seeking to renovate and upgrade the arcade. Crash recentlyremoved some old games. freeing up 300 square feet ofspace. Crash has narrowed his options for new games to the following: ' Install video games thatsimulate highadrenaline activities such as driving a motorcycle and skiing. Each of these machines would consume SCI square feet of space and generate revenues of $20 per Fully occupied hour. Based on the expected 40% occupancy rateI each installed machine would generate maintenance costs of $100 perweek. Crash believes that. at a maximum. he could install up to ve such machines. | Install a dance game. This game allows one or two plapers to \"dance\" on pads to match the moves displayed on the screen. Because good players attract considerable numbers of bystanders. Crash budgets '?5 square feet per game. While mostarcades have at leastone such game, I22ras|i| does notwish to have more than two games. {He do es not currently have the game available.) The dance game generates 54-0 in revenue per occupied hour. With estimated usage at 30%. Crash projects maintenance expenses ofSSDIJ- per week per machine. | Install simple games [e.g.., Whack-aMole'] aimed at pre-teens and children. These games occupy 10 square feet each and require virtually no maintenance [for all practical purposesJ assume it is 50 per week]. To maintain balance in his arcade. Crash believes that he coqu install a maximum ofsix simple games. Finally. while the simple games generate $15 in revenue per hour occupied. the occupancy rate hovers around 1.0%. (hash behaves that he couid deploy any combination ofthese three options and still maintain the overall balance ofgames in his video arcade. REQUIRE D a. Determine the contribution marginper weekper square foot devoted to each kind of game. Based solely on the ranking ofthe games as pertheir protability, allocate the 30-0 feetin available space to maximize Crash's expected prot per week. 1"Jlilat is Crash's expected prot with this allocation? Assume thatthe arcade is open For 100 hours per week b. Esplain. whywur solution in part [a] may notfully use all available capacity. c. Suggest an alternative conguration that might help Crash improve his expected prot per week. Pageil of! d. 1What do you conclude aboutthe validity ofthe rule "allocate scare capacity among uses to maximize the contribution margin per unit of the scarce resource?" PROBLEM 1: TWO \"SEGMENT\" [WP ANALYSIS Ian Van Voorhis is a orist in Boulder, Colorado. Dividing his clients into two major categories. he provides you with the following income statement He stresses that, for most orists {including himself}, each segment aocounts for 40% of total revenues. Retail Institutional Total Revenues S 400,000 $ 600,000 $ 1,000,000 Variable cost 3 120,000 $ 300,000 3 420,000 Contribution margin 5 280,000 $ 300,000 3 580,000 Traceable xed costs 3 175,000 $ 30,000 3 255,000 Segment margin 5 105,000 $ 220,000 $ 325,000 Common xed costs 3 200,000 Prot before taxes 3 125,000 REQUIRED 1. Suppose Ian allocates common xed costs equally between the two segments. Treating each segment as a separate business, determine the breakeven revenue for institutional revenues and for retail revenues. Does Ian's shop, as a whole, break even with these revenues? 2. Assume ]an does not allocate any xed costs between the two segments [including the traceable xed costs}. Compute ]an's Weighted Contribution Margin Ratio using the product mix provided in the problem text. What is Ian's bleakeven revenue? 3. Why do the answers for parts {1] and {2] differ? What lie}.r feature of ian's business is not captured in the answer to part [1}? What do you conclude about the wisdom of allocating common costs and performing breakeven analysis separately by segment? 4-. When would a rm perform breakeven analysis for a segment