MA CH14 HW1 1. value: 12.50 points (b) Book value (c) Current purchase cost references 3. value: 12.50 points per machine hour if component B81 is purchased is $ [removed] rev: 01_02_2013 references 5. value: 12.50 points [removed][removed] Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products. Blender Electric Mixer Direct material $ 6 $ 11 Direct labor 4 9 Manufacturing overhead @ $16 per machine hour 16 32 Cost if purchased from an outside supplier 20 38 Annual demand (units) 20,000 28,000 Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $10. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Required: 1. If 50,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased? (Leave no cells blank – be certain to enter “0” wherever required.) Blenders Electric Mixer Manufacture [removed] [removed] Purchase [removed] [removed] 2. With all other things constant, if management is able to reduce the direct material for an electric mixer to $6 per unit, how many units of each product should be manufactured? Purchased? (Leave no cells blank – be certain to enter “0” wherever required.) Blenders Electric Mixer Manufacture [removed] [removed] Purchase [removed] [removed] references [The following information applies to the questions displayed below.] Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter’s and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Jupiter’s model no. 43 skateboard follow. Direct material $ 8.20 Direct labor: .25 hour at $9.00 2.25 Total manufacturing overhead: .5 hour at $20 10.00 Total $ 20.45 Additional data: • The normal selling price of model no. 43 is $26.50; however, Venus has offered Jupiter only $15.75 because of the large quantity it is willing to purchase. • Venus requires a modification of the design that will allow a $2.10 reduction in direct-material cost. • Jupiter’s production supervisor notes that the company will incur $3,700 in additional setup costs and will have to purchase a $2,400 special device to manufacture these units. The device will be discarded once the special order is completed. • Total manufacturing overhead costs are applied to production at the rate of $20 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $750,000 and planned production activity of 60,000 machine hours (5,000 per month). • Jupiter will allocate $1,800 of existing fixed administrative costs to the order as “. . . part of the cost of doing business.” [removed] 6. value: 12.50 points [removed][removed] Required: 1-a. Calculate the net contribution. (Do not round your intermediate calculations. Omit the “$” sign in your response.) Net contribution $ [removed] 1-b. Should the order be accepted from a financial point of view (i.e., is it profitable)? [removed] Yes [removed] No references Worksheet Learning Objective: 14-04 Identify relevant costs and benefits, giving proper treatment to sunk costs, opportunity costs, and unit costs. Difficulty: Medium Learning Objective: 14-05 Prepare analyses of various special decisions, properly identifying the relevant costs and benefits. [removed] 7. value: 12.50 points [removed][removed] 2-a. Assume that Jupiter’s current production activity consumes 70 percent of planned machine-hour activity, estimate the available hours. Available hours [removed] 2-b. Can the company accept the order and meet Venus’ deadline? [removed] No [removed] Yes references Worksheet Learning Objective: 14-04 Identify relevant costs and benefits, giving proper treatment to sunk costs, opportunity costs, and unit costs. Difficulty: Medium Learning Objective: 14-05 Prepare analyses of various special decisions, properly identifying the relevant costs and benefits. [removed] 8. value: 12.50 points [removed][removed] 3. What options might Jupiter consider if management truly wanted to do business with Venus in hopes of building a long-term relationship with the firm? (You may select more than one answer. Click the box with a check mark for the correct answer and click to empty the box for the wrong answer.) [removed] Acquiring more machine capacity [removed] Working overtime [removed] Outsourcing some units [removed] Completely ignore the additional setup costs and the new device costs, as these are fixed in nature [removed] Sacrificing some current business in the hope that a long-term relationship with Venus can be established and proves to be profitable references
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