Question 1 Quincy inc, manufacturers and sells bakery products and has decided to put a new product on the market - an ice cream cake. The product will be sold in boxes of 24 . The price of each box will be 58 . The compamy will use its excess capacity to manufacture the product. The accounting department has decided that $100,000 worth of fixed overhead cost should be allocated to the new product. The accounting department has budgeted the following costs based on a production of 100,000 boxes. Quincy can purchase ice cream units, one of the ingredients in the cake, from a dairy company. The dairy company would sell the ice cream units for $0.90 for 24 units. If Quincy buys the ice cream units from the dairy company, direct labour and variable overhead costs would be reduced by 10%. The direct material costs would be 20% lower than the original budgeted amount and would not include the cost of the ice cream units purchased from the dairy company. Required: 1. Should Quincy make or buy the ice cream units? Explain your decision. 2. Calculate the maximum amount the Quincy should pay for the ice cream units 3. Suppose that sales projections are revised in that Quincy could sell 125,000 boxes instead of 100,000 bowes. In such a case, to produce ice cream, it would need to lease a new machine for $10,000 a year. Under these conditions should Quincy make the 125,000 ice cream units or buy them from the dairy company? Explain your dedsion. 4. Suppose that sales projections are revised and Quincy could sell 125,000 bowes instead of 100,000 boxes and that it would need to lease a machine. Would it be better off if it makes the ice cream for the first 100,000 boxes and buy the remainder from the dairy company? Explain your decision. Assumed the 90-cent price is avallable for any volume. 5. List qualitative factors in Quincy should consider when determining whether it should make or buy the ice cream units Question 2 Fumiture shop company manufacturers three types of computer desks. The income statement for the three products and the whole company is shown below. Guincy can purchase ice cream units, one of the ingrecienss in the cake, from a dairy compacy. The dairy company would sell the ice cream units for 50.90 for 24 units. If Quiney busp the ice im the dairy company, direct labour and variable everhead costs would be 2 Of 2 K. The direct material conts would be 20 s lower than the original budgeted Required: 1. Should Quincy make or buy the ice cream units? Explain your decisian. 2. Calculate the maximum amount the Quincy should pay for the ice cream units 3. Suppose that sales projections are revised in that Quincy could sell 125 , 000 boves instead of 100,000 boxes. In such a case, to produce ice cream, it would need to lease a new machine for $10,000 a year. Under these conditions should Quincy make the 125,000 ice cream units or buy them from the dairy company? Explain your decision. 4. Suppose thar sales projections are fevised and Quincy could sell 125,000 beses instead of 100,000 boxes and that it would need to lease a machine. Would it be betaer off if it makes the ike cream for the first 100,000 boxes and buy the remainder froen the dairy company? Explain your decision. Assumed the 90 -cent price is evailable for any volume. 5. List qualitative factors in Quincy should consider when determining whether it should make or buy the ice cream units Question 2 Furniture shop company manufacturers three types of computer dests. The income statement for the three products and the whole company is shown below. The company produces 1000 units of each product. The company's capacity is 9000 labour hours. The labour for each product is 4 hours for Product A, three hours for Product B, and two hours for Product C. Fixed costs are allocated baied on labour hours. Required 1. If the current production levels are maintained should the campany eliminate product C?. Explain your reasoning and show your calculations. 2. If the company can sell unlimited quamtities of any of the three products, which product should be produced? 3. Suppose the company can sell unimited quantities of amy of the the products. If a custamer wanted to putchase 500 units of Product C what would the minimum sales peice be per unit for this order? 4. The company has a government contract that requires it to supply 500 units of each product to a customer, The total market demand for a single product is limited to 1000 units, induding those units in the government contract. How many units of cach product should the company manufacture to meet its commitment to the government and maximize its total contribution matgin
