short term decision analysis

incremental decision analysis

Short-Tom Decision Analysis | Name 1_1 Part A: Scarce Resource Constraint Crest information Technologies manufactures three proclucts: Light, Medium, and Heavy. Demand for the three products is as follows: 800 units of Light, 600 units of Medium, and 500 units of Heavy. Crest has 9,800 machine hours available. Product information is provided below: Light Medium Heavy Selling Price per unit $110 $140 $250 Variable Manufacturing Costs per unit $70 $80 $160 Machine Hours per Unit 4 5 15 REQUIRED: Determine how many units of each Educt should be Eoduced and what the total contribution margin associated with your solution is. Part B: Special Order Clearwater Company operates a wine outlet in a tourist area. One gallon bottles sell for $25 each. Variable manufacturing costs are $15 per gallon. Fixed costs total $4,000 per day. Regular demand has been 800 gallons per day. Clearwater has the capacity to sell a maximum of 1,000 gallons per day. REQUIRED: A. What is the total manufacturing cost per gallon? B. Abus loaded with senior citizens stops by at closing time and the tour director offers to purchase 120 gallons for $18.00 per gallon. Clearwater, believing that they would incur a loss of $2.00 per gallon, refuses the special order. Should the special order of 120 gallons be accepted? Was Clearwater correct about losing $2.00 per gallon? Why or why not? C. A fund-raising organization has offered to make a one-time purchase of 300 gallons of wine from Clearwater for $18 per gallon. Should Clearwater accept the special order of 300 gallons? y or why not? Part C: Make or Buy Omark ation currentl manufactures a sub-assembl for its main oduct. The man costs for the sub-assembly PER UNIT are as follows: Direct materials $13-00 Direct labor 30.00 Variable overhead 9.00 Fixed overhead' 15 .00 Total $72.00 Reliance Corporation has contacted Omark with an offer to sell Omark the sub-assemblies for $65 each. 60% of total xed overhead costs can be eliminated if the sub-assemblies are purchased from Reliance. Omar]: produces 6,000 sub-assemblies each period. Should Omark continue to make the sub-assemblies themselves or should they purchase the sub-assemblies from Reliance Corporation? Why