The company BB Inc. manufactures part X for its annual production. The following table presents information on production costs at a certain level.

BB Inc. received an offer to purchase $30,000$ units of the already manufactured part for $$35\mathrm{.}25$ per unit. There are fixed indirect costs of $$9$ per unit that

would be maintained even if the same units were purchased. However, purchasing the piece would allow BB Inc. to rent the production area for $$200,000$

annually.

Required:

Prepare a report comparing both alternatives and reflecting how much the profit would increase or decrease if you decide to buy the part. It must include

all computations performed.

Exercise $5$B: Consider accepting a special order to produce

The ROAR company manufactures a single product that it sells for $$17\mathrm{.}00$ each unit. The cost of each unit produced at a monthly production level of $10,000$

units is:

The total monthly production capacity is $12,000$ units. A special order for $2,000$ units was received at a purchase price of $$14\mathrm{.}00$ per unit. Regular sales will

not be affected by this order.

Required:

How much will the monthly profit increase or decrease if ROAR accepts the special order? Please note that accepting the order will not affect fixed costs.

Suppose the company has $600$ units of an older model of this item that were unsold last year. To have the units, the company has to sell them at a

reduced price through normal sales channels. Identifies the unit cost that is relevant for determining the minimum price at which these units can be

available. Explain why you consider that to be the relevant cost.

Exercise $5$C: Utility of a restricted resource

The School Pack company manufactures school bags with a very resistant plastic bottom. It has three models that are the best sellers. The following table

offers you information about these models.

The constrained resource is the processing time on the machine.

Determine the model with the highest and lowest performance in the use of processing time as a restricted resource.

Determine the model with the highest and lowest performance in the use of plastic if this is the restricted resource.

Determine the model that has the highest contribution margin. Did this model turn out to be the highest performing in the previous answers? If it wasn't,

explain why.

Exercise $5$D: Payback period

A company dedicated to the sale of solid wood for the manufacture of cabinets and wooden furniture is considering investing in a wood shaping machine

that will produce the following cash flows in the coming years. The investment will be made in two years as indicated below.

Determine the recovery period of the investment.

Indicate whether this method is an appropriate tool to determine whether the company should make the investment or not and why.