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Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal production includes the following: Total Cost Unit Cost Direct materials $25,000 $5.00 Direct labor 15,000 3.00 Variable manufacturing overhead 7,500 1.50 Variable marketing overhead 11,000 2.20 Fixed plant overhead 30,000 6.00 Total $88,500 $17.70 Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase price. If required, round your answers to the nearest whole number. Required: 1. What are the alternatives for Fresh Foods? Make the ingredient in house or buy it externally. 2. List the relevant cost(s) of internal production and of external purchase. All of the above 3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.) Make 56,000 x the ingredient is purchased externally. Which alternative is more cost effective and by how much? 4. Now assume that 20% of the fixed overhead can be avoided (Use total cost when giving your answer.) Buy y $ 300,000 x The Millenium Company has been approached by a new customer with an offer to purchase 10,000 units of its model F80 at a price of $4.00 each. The new customer is geographically separated from the company's other customers, and existing sales would not be affected. Millenium normally produces 75,000 units of F80 per year but only plans to produce and sell 60,000 in the coming year. The normal sales price is $12 per unit. Unit cost information for the normal level of activity is as follows: Direct materials $1.75 Direct labor 2.50 Variable overhead 1.50 Fixed overhead 3.25 Total $9.00 Fixed overhead will not be affected by whether or not the special order is accepted. Required: 1. Should the company accept or reject the special order? Reject 2. By how much will operating income increase or decrease if the order is accepted? Decrease by $ 18,500 X Casual Essentials, Inc. manufactures two types of team shirts, the Homerun and the Goalpost, with unit contribution margins of $5 and $15, respectively. Regardless of type, each team shirts must be fed through a stitching machine to affix the appropriate team logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Homerun shirt requires 6 minutes of machine time, and each Goalpost shirt requires 30 minutes of machine time. Assume that a maximum of 47,990 units of each team shirts can be sold. Required: If required, round your answers to the nearest whole number. 1. What is the contribution margin per hour of machine time for each type of team shirts? Contribution Margin Homerun 50 Goalpost 30 2. What is the optimal mix of team shirts? Optimal Mix Homerun 47,990 units Goalpost X units 3. What is the total contribution margin earned for the optimal mix? $ 239,950 x