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Susan's Shades produces standard and deluxe sunglasses (Click the icon to view the information.) The company has 20,000 machine hours available. In one machine hour,
Susan's Shades produces standard and deluxe sunglasses (Click the icon to view the information.) The company has 20,000 machine hours available. In one machine hour, Susan's can produce 45 pairs of the standard model or 15 pairs of the deluxe model. Read the requirements First, calculate the total contribution margin at full capacity for each model. Select the labels and calculate the contribution margin at capacity for the standard model, then the deluxe model. Deluxe Standard $ 15 $ Sales price per pair 29 Less: Variable expenses per pair 11 26 $ 4 $ 3 Contribution margin per pair Units produced each machine hour Contribution margin per machine hour 45 15 $ 180 $ 45 20,000 20,000 Capacity- number of machine hours $ Total contribution margin at full capacity 3,600,000 $ 900,000 Which model should Susan's emphasize? Sport Sunglasses Information Susan's should emphasize the standard model. Requirement 2. Susan's also produces a third product: sport sunglasses. Review the cost and other information related to this product. Identify and analyze the alternatives. What is the best course of action? Susan's incurs the following costs for 18,000 pairs of its sport sunglasses: First, complete the following table Data Table - Buy Sunglasses Facilities Make Other Make Sunglasses Idle Products Standard Deluxe Relevant Costs: $ 15 $ 29 Direct materials Sales price per pair Variable expenses per pair 11 26 Direct materials $ 54,000 Direct labor 90,000 Variable manufacturing overhead 72,000 18,000 Fixed manufacturing overhead Total manufacturing cost $ 234,000 18,000 Divided by number of pairs $ 13 Cost per pair Another manufacturer has offered to sell similar sunglasses to Susan's for $15 per unit, a total purchase cost of $270,000. If Susan's outsources and leaves its plant idle, it can save $8,000 of fixed overhead costs. Or it can use the freed manufacturing facilities to make other products that will contribute $12,000 to profits. In this case, the company will not be able to avoid any fixed costs Direct labor Variable overhead Fixed overhead Print Done Purchase cost Total cost of obtaining sunglasses Profit from other products Net cost of obtaining sunglasses Print Done
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