Question #2A - 13 Marks

Juett Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is as follows:

Direct Materials	$29.6
Direct Labour	$5.80
Variable Manufacturing Overhead	$2.50
Fixed Manufacturing Overhead	$17.20
Variable Selling & Administrative Expense	$1.80
Fixed Selling & Administrative Expense	$6.70

The normal selling price of the product is $72.90 per unit. An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.10 less per unit on this order than on normal sales. Required:

a) Suppose there is ample idle capacity to produce the units required by the overseas customer, and the special discounted price on the special order is $66.10 per unit. By how much would this special order increase (decrease) the company's operating income for the month? (5 Marks)

b) Suppose there is not enough idle capacity to produce all of the units for the overseas customer,and accepting the special order would require cutting back on production of 1,300 units for regular customers. What impact would this have the company's operating income? (5 Marks)

c)What would be the minimum acceptable price per unit for the special order? (2 Marks)

d)List other factors Juett Company should be concerned about before accepting these orders? (3 Marks)

Question 2B - 15 Marks

Glocker Company makes three products in a single facility. These products have the following unit product costs:

	Products
	A	B	C
Direct materials	$10.90	$15.80	$8.00
Direct labour	12.50	12.60	9.90
Variable manufacturing overhead	2.40	1.20	1.40
Fixed manufacturing overhead	11.60	7.20	7.80
Unit product cost	$37.40	$36.80	$27.10

Additional data concerning these products are listed below.

	Products
	A	B	C
Mixing minutes per unit	2.00	1.00	0.50
Selling price per unit	$55.80	$54.60	$43.10
Variable selling cost per unit	$2.10	$1.40	$1.90
Monthly demand in units	2,000	1,000	3,000

The mixing machines are potentially a constraint in the production facility. A total of 5,900 minutes are available per month on these machines. Required: a) How many minutes of mixing machine time would be required to satisfy demand for all four products?( 3 Marks) b) How much of each product should be produced, rounded to the nearest whole unit, to maximize operating income(12 Marks)