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Situation Three: Your Company makes three products in a single facility. These products have the following unit product costs: Product A Product B Product C Direct material $25.00 $25.00 $26.00 Direct labor 14.00 16.00 15.00 Variable manufacturing overhead 2.00 3.00 4.00 Fixed manufacturing overhead 20.00 27.00 21.00 Unit cost $61.00 $71.00 $66.00 Additional data concerning these products are listed below: Product A Product B Product C Mixing minutes per unit 2.50 1.50 1.80 Selling price per unit $71.00 $88.00 $82.00 Variable selling cost per unit $2.50 $2.00 $3.50 Monthly demand in units 1,000 2,500 3,500 The mixing machines are potentially the constraint in the production facility. A total of 10,800 minutes are available per month on these machines. Direct labor is a variable cost in this company. Required: a. How many minutes of mixing machine time would be required to satisfy demand for all four products? b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.) c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.);Situation Four: The most recent monthly income statement for Your Company is given below: Store A Store B Total Sales $500,000 $700,000 $1,200,000 Variable expenses 200,000 490,000 690,000 Contribution margin 300,000 210,000 510,000 Traceable fixed expenses 125,000 300,000 425,000 Store segment margin 175,000 (90,000) 85,000 Common fixed expenses 25,000 35,000 60,000 Net operating income $150,000 $ (125,000) $ 25,000 Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 15 percent decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars. Required: Compute the overall increase or decrease in the company's operating income if Store B is closed.


Paper#75892 | Written in 18-Jul-2015

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