Question
Yarex, Inc. manufactures three different fans - CF, SF, and WF. Data on the three fans is presented below: Budget Information: CF SF WF Inventory
Yarex, Inc. manufactures three different fans - CF, SF, and WF. Data on the three fans is presented below:
Budget Information: CF SF WF
Inventory units, January 1, 2021 1,6002,1001,800
Production units in 2021 3,2002,8003,400
Units sold in 2021 3,5003,0003,600
Production units in 2022 3,8003,4003,600
Estimated Inventory units, December 31, 2022700600900
Cost and Production Information:
Selling price $450 $500 $420
Unit variable cost $210 $220 $240
Machine-hours per unit8 7 5
Avoidable fixed costs, if product line is not produced $198,000 $245,000 $211,500
Yarex's production capacity is 52,200 machine-hours per year.
Yarex is currently facing a business decisionin 2022:
ThaiCo, the Thailand subsidiary of Yarex, currently purchases 4,500 units of a simpler version (WF-N) of WF, from its local supplier at $380 each. If Yarex was to make WF-N, the company estimates that WF-N would result in variable costs of $200 per unit and will require only 4 machine hours per unit to manufacture. Furthermore, Yarex will invest in a new stamping machine solely for the production of WF-N for a fixed cost of $207,000. If Yarex produces 4,500 units for ThaiCo, it willnotproduce and sell WF to compete with ThaiCo.
Calculate the following items: CF SF WF
The budgeted Sale units for each model for 2022. units units units
The contribution margin per unit for each model. $ $ $
The profitability index for each model. $ $ $
Ranking the order of priority for production.
Calculate the total production hours required for the 3 models. Hours
For which model should production be reduced and by how many units?
The number of units should be reduced. units
Calculate the sale breakeven in units, if Yarex decides to make WF-N:
Given the machine hour constraint, answer the following questions:
Number of hours required for WF:hours
Number of hours required for Special Order (WF-N):hours
Impact on CF :hours
Impact on SF :hours
Yarex is considering taking the special order. Please answering the following questions:
What is the benefit from the sale of WF-N?
What is the cost from not selling WF?
What is the Opportunity Cost from other products?
What is the minimum transfer price per unit of WF-N?
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