Task #2

The vice-president of sales thinks he can improve results by adding a new product line: Jigsaw blades (Appendix II). He is certain the Jigsaw blades will make "tons of money," but the cost and profit projections aren't supporting his claim. Caroline would like to know whether the Jigsaw blades have the potential to make a significant contribution to the company's net income. You advise Caroline that the best strategy would be to look at the incremental contribution of adding Jigsaw blades to the product line, and the two of you agree that you will perform only a quantitative analysis at this point.

Core 2 - Integrated Problem 7 Problem Appendix II Jigsaw blade line The estimated annual sales volume is 80,000 Jigsaw blades. Each blade requires 0.3 machine hours, and the wholesale selling price per blade is $10.00. The costs per blade will be: Direct materials $ 2.25 Direct labour 0.50 Overhead 5.50 Variable selling and administrative costs 1.10 Fixed selling and administrative costs 0.46 Total costs 9 81 Net income per blade $ 0.19 Overhead costs per blade have been calculated consistent with the circular saw blades that is, estimated direct labour hour cost * $11.00, or $0.50 * $11.00 = $5.50. Fixed selling and administrative costs comprise additional advertising costs of $18,550 that would need to be incurred to sell the Jigsaw blades. CPA CHARTERED PROFESSIONAL 5/ 13 ACCOUNTANTS PEP CPA COMPTABLES PROFESSIONNELS AGREES PFP