Solution for questions

Question 1 and 2

PART A Question 1: (30 Marks) Garmin Lid. manufactures two types of GPS devices, (GPSMAP64) and (GPSMAP 78).The costs for the products are shown herebelow: "GPSMAP 64) (GPSMAP 78) Units sold 900 1,600 Unit sales price $290 $170 Variable cost per unit Raw material $75 $60 Labor $64 $48 Total fixed costs = $50,000 Required: a. Compute the contribution margin per unit for each of the twp products, GPSMAP 64 and 78. (10 Marks) b. Assuming the fixed costs are allocated based on the units produced. Compute the selling price per unit of each product to achieve a profit margin of 35%. (10 Marks) C. Assume that Garmin has a maximum working labor capacity of 2,940 labor hours. Labour hours are paid at a rate of $32 per hour. Which of the two products, (GPSMAP 64) or (GPSMAP 78) is most profitable for Garmin Led? Show your calculations (10 Marks)Question 2: (40 Marks) Ashville Manfuraturing Lid. produces construction equipment and several components for the construction industry. Part of its manufacturing includes a component (QR20) that it uses in several of its equipment. Ashville's management is considering whether to continue manufacturing theses components on its premises or to purchase them from an outside source. The following information is available: a- The company needs 6,000 of these components annually. These components (QR20) can be purchased from an outside supplier at a cost of $15 per component. b- The unit cost of manufacturing this component is $35, computed as follows: Direct materials $ 50,000 Direct labor 65,000 Factory overhead. Variable 35.000 Fixed 60.000 Total manufacturing costs $210,000 Cost per unit ($210,000 # 6,000 components S 35 c- Discontinuing the manufacture of the components (QR20) will eliminate all the raw materials and direct labor costs but will eliminate only 70% of the variable factory overhead costs. d- If the components (QR20) are purchased from an outside source, machinery used in the production of components will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $3,000 of the fixed costs associated with depreciation and taxes. No other reductions in fixed factory overhead will result from discontinuing the production of components. Required: 1- Determine the incremental cost or benefit of buying the component (QR20) from the outside supplier. Would you recommend that Ashville manufactures these components or purchases them from the outside source? (Prepare a schedule to determine the incremental cost or benefit of buying the components from outside supplier). (25 marks) 2- Assume that if the component (QR20) are purchased from the outside source, the factory space previously used to produce this component can be used to manufacture an additional 4,000 units of another component (QD33) per year. These components (QD33) have an estimated contribution margin of $8 per unit. The manufacture of these additional components (QD33) would have no effect on fixed factory overhead. Would this new assumption change your recommendation as to whether to make or buy the original components (QR20)? In support of your conclusion, prepare a schedule showing the incremental cost or benefit of buying the compnent (QR20) from the outside source and using the factory space to produce the additional components (QD33). (10 marks) 3-What nonfinancial concerns should Ashville Manufacturing Lid. take into consideration