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4) The New Company has two products (Product A and...




4) The New Company has two products (Product A and Product B) with the following profile as far as contribution margin: A B Selling Price $15 $10 Variable Cost $ 12 $5 Unit CM $3 $5 Sales Mix 60% 40% Company?s total fixed costs equal $ 76,000. Using a weighted average CM, what is the company?s breakeven point in units? 2). Allocated Cost an Opportunity Cost Mighty Mint Co. produces a mint syrup used by gum and candy companies. Recently, the company has had excess capacity due to a foreign supplier entering its market . Mighty Mint is currently bidding on a potential order from Quality Candy for 5,000 cases of syrup. The estimated cost of each case is $18, as follows: Direct Material $6 Direct Labor 4 Overhead 8 Total $18 The predetermined overhead rate is $2 per direct labor dollar. This was estimated by dividing annual overhead (1,000,000) by estimated annual direct labor (500,000). The $1,000,000 of overhead is composted $250,000 of variable costs and $750,000 of fixed costs. The largest fixed costs relates to depreciation of plant and equipment. A. With respect to overhead, what is the opportunity cost of producing a case of syrup? B. Suppose Mighty Mint can win the Quality Candy business by bidding a price of $16 per case (but no higher price will result in a winning bid. Should Mighty Mint bid $16. 3) Make ?or- buy Decision / For most construction projects, Bradley Heating and Cooling buys sheet metal and forms the metal into heating and cooling ducts as needed. The company estimates the costs of making and installing ductwork for the Kerry Park Shopping mall to be as follows: Materials 30,000 Labor to form ductwork 2,000 Labor to install ductwork 8,000 Misc. Variable costs 1,000 Fixed costs allocated based on labor hrs. 2,500 Total Costs 43,500 Fixed costs relate to the company?s building, equip., and office staff. The company plans on billing the Kerry Park developer $60,000for services. Bradley is currently behind schedule on other projects and is paying a late penalty of 1,000 per day. Walt Bradley, the owner of Bradley Heating and cooling, is considering ordering prefabricated ductwork for the Kerry Park Job. The prefabricated ductwork will cost $34,000 (including the cost of sheet metal). If Walt buys the prefabricated ductwork he?ll be able to reassign workers to another project and void 5 days of late fees. a.Should Bradley make the ductwork or buy it prefabricated? Why?


Paper#8405 | Written in 18-Jul-2015

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