Question 1
What would the total opportunity cost be if by accepting the special order the company lost sales of5,400 units to its regular customers? Assume the preceding facts plus a normal selling price of $24 per unit.
Total opportunity cost -
Question 2
Should Alton produce the special order for SHC? Yes or No
Suppose that Alton Inc. had been working at less than full capacity to produce25,000 units of the product when SHC made the offer. What is the minimum price per unit that Alton should accept for the modified product under these conditions?(Round your answer to 2 decimal places.)
Minimum price -
Question 3
Assume that machine A has already been purchased. Is it preferable to use machine A to make the switches or to purchase the switches from the external supplier?
Use machine A to make the switches or Purchase the switches from the external supplier.
Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A with machine B?(Do not round intermediate calculations. Round your final answer up to the nearest whole number.)
Volume level- units (per year)
Skinned Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 16,500 units of one of its most popular products. Grant currently manufactures 33,000 units ofthis product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager ofGrant wants to set the bid at $11 because she is sure that Grant will get the business at that price. Others on the executive committee of the firm object, saying that Grant would lose money on the special order at that price. Units 33, 668 49, 586 Manufacturing costs: Direct materials $132,668 $198,868 Direct labor 165,868 247,586 Factory overhead 132,668 148,586 Total manufacturing costs $429,668 $594,868 Unit cost $ 13 $ 12 Required 2. What is the relevant cost per unit? What do you think the minimum shortterm bid price per unit should be? What would be the impact on shortterm operating income if the order is accepted at the price recommended by the sales manager? 4. What would the total opportunity cost be if by accepting the special order the company lost sales of 5,400 units to its regular customers? Assume the preceding facts plus a normal selling price of $24 per unit. Complete this question by entering your answers in the tabs below. Required 2 Required 4 What is the relevant cost per unit? What do you think the minimum shortterm bid price per unit should be? What wouid be the impact on shortterm operating income if the order is aocepted at the price recommended by the sales manager? Relevant cost per unit Bid price per unit should be any price above Change in short-term operating income Alton Inc. is working at full production capacity producing 30,000 units of a unique product. Manufacturing costs per unit for the product are as follows: Direct materials E 7 Direct labor 6 Manufacturing overhead 8 Skipped _ _ Total manufacturing cost per unit $21 The per-unit manufacturing overhead cost is based on a $6 variable cost per unit and $60,000 fixed costs. The nonmanufacturing costs, all variable, are $6 per unit, and the sales price is $40 per unit. Sports Headquarters Company (SHC) has asked Alton to produce 6,000 units of a modication of the new product. This modification would require the same manufacturing processes. However, because of the nature of the proposed sale. the estimated nonmanufacturing costs per unit are only $3 (not $6). Alton would sell the modified product to SHC for $30 per unit. Required 1-a. Calculate the contribution margin for 6,000 units for both the current and special order. 1b. Should Alton produce the special order for SHC? 2. Suppose that Alton Inc. had been working at less than full capacity to produce 25,000 units ofthe product when SHC made the offer. What is the minimum price per unit that Alton should accept for the modified product under these conditions? Complete this question by entering your answers in the tabs below. Calculate the contribution margin for 6,000 units for both the cun'ent and special order. Special order Vista Company manufactures electronic equipment. In 2018, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2.6 per switch. As an alternative, Vista's CEO considered purchasing either machine A or machine B so the company could manufacture its own switches. The CEO decided at the beginning of 2019 to purchase machine A, based on the following data: Machine A Machine B Annual fixed cost (depreciation) $141,868 $216,869 Variable cost per' switch 6.69 8.25 | Required: 1. Assume that machine A has not yet been purchased. What is the annual volume that would make the company indifferent between the two decision alternatives (i.e., purchasing and then using machine A to make the switches versus purchasing the switches from the outside vendor)? 2. Assume that machine A has already been purchased. Is it preferable to use machine A to make the switches or to purchase the switches from the external supplier? 3. Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A with machine B? Complete this question by entering your answers in the tabs below. ' Required 3 Assume that machine A has not yet been purchased. What is the annual volume that would make the company indifferent between the two decision alternatives (i.e., purchasing and then using machine A to make the switches versus purchasing the switches from the outside vendor)? (Do not round intermediate calculations. Round your nal answer up to the nearest whole number.) Required 1. Required 2 Show lessA Slapped Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T4 and T-2. The sales for T2 are decreasing and the purchase costs are increasing. The rm might drop T2 and sell only T1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10% next year, but the firm's cost structure will remain the same. T-1 T-2 Sales $226, 666 $276,666 Variable costs: Cost of goods sold 74,666 138,666 Selling & administrative 25,666 54,666 Contribution margin $121,666 $ 84,666 Fixed expenses: Fixed corporate costs 64,666 79,666 Fixed selling and administrative 16,666 25,666 Total fixed expenses $ 56,666 $164,666 Operating income $ 41.966 $(291595) l Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T4. 2. By what percentage would sales from T-1 have to increase in order to make up the nancial loss from dropping T-2? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 3. What is the required percentage increase in sales from T1 to compensate for lost margin from T2, if total fixed costs can be reduced by $45,500? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) Required % increase in sales of T-1 Required % increase in sales from T-1
