Best Homes Ltd. has 100 lots on which to build new houses. Two styles of houses are to be built, Model A and Model B. Better Homes wants to build these houses over the next nine months. During this time, Better Homes will have available 12 000 man-hours of carpentry labour and 13 000 man-hours of mason labour. Each Model A house requires 200 man-hours of carpentry labour and 50 man-hours of mason labour. Each Model B house requires 100 man-hours of carpentry labour and 120 man-hours of mason labour. The profit contribution of a Model A house is projected to be $5,100, while that of a Model B house is projected at $5,000. Better Homes wants to know how many houses of each type to build so as to maximize profit. Formulate this as a linear programming problem.

Best Homes Ltd. has 100 lots on which to build new houses. Two styles of houses are to be built, Model A and Model B. Better Homes wants to build these houses over the next nine months. During this time, Better Homes will have available 12 000 man-hours of carpentry labour and 13 000 man-hours of mason labour. Each Model A house requires 200 man-hours of carpentry labour and 50 man-hours of mason labour. Each Model B house requires 100 man-hours of carpentry labour and 120 man-hours of mason labour. The profit contribution of a Model A house is projected to be $5,100, while that of a Model B house is projected at $5,000. Better Homes wants to know how many houses of each type to build so as to maximize profit. Formulate this as a linear programming problem.

Name: Best Homes Ltd. has 100 lots on which to build new houses. Two styles
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Description: Best Homes Ltd. has 100 lots on which to build new houses. Two styles of houses are to be built, ModelA and Model B. Better Homes wants to build these houses over the next nine months. During this time,Better Homes will have available 12 000 man-hou

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 8CE: Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each...

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Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Next year, HHH expects to purchase 25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: There is no work-in-process inventory; in other words, a cleaning is started and completed on the same day. Required: 1. Prepare a statement of services produced in good form. 2. What if HHH planned to purchase 30,000 of direct materials? Assume there would be no change in beginning and ending inventories of materials. Explain which line items on the statement of services produced would be affected and how (increase or decrease).
Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Next year, HHH expects to purchase 25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. HHH expects to sell 15,000 cleanings at a price of 45 each next year. Total selling expense is projected at 22,000, and total administrative expense is projected at 53,000. Required: 1. Prepare an income statement in good form. 2. What if Jean and Tom increased the price to 50 per cleaning and no other information was affected? Explain which line items in the income statement would be affected and how.
Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?
Jean and Tom Perritz own and manage Happy Home Helpers. Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Next year, HHH expects to purchase 25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. Required: 1. Prepare a statement of cost of services sold in good form. 2. How does this cost of services sold statement differ from the cost of goods sold statement for a manufacturing firm?
Reggie Wilmore has just started a new businessbuilding and installing custom garage organization systems. Reggie builds the cabinets and work benches in his workshop, then installs them in clients garages. Reggie figures his overhead for the coming year will be 12,000. Since his business is labor intensive, he plans to use direct labor hours as his overhead driver. For the coming year, he expects to complete 100 jobs, averaging 25 direct labor hours each. However, he has the capacity to complete 125 jobs averaging 25 direct labor hours each. Required: 1. Four measures of activity level were mentioned in the text. Which two measures is Reggie considering in computing a predetermined overhead rate? 2. Compute the predetermined overhead rates using each of the measures in your answer to Requirement 1. 3. Which one would you recommend that Reggie use? Why?
Reggie Wilmore has just started a new businessbuilding and installing custom garage organization systems. Reggie builds the cabinets and work benches in his workshop, then installs them in clients garages. Reggie figures his overhead for the coming year will be 12,000. Since his business is labor intensive, he plans to use direct labor hours as his overhead driver. For the coming year, he expects to complete 100 jobs, averaging 25 direct labor hours each. However, he has the capacity to complete 125 jobs averaging 25 direct labor hours each. Required: 1. What source documents will Reggie need to account for costs in his new business? 2. Suppose Reggies business grows, and he expands his workshop and hires three additional carpenters to help him. What source documents will he need now?
Your bakery can produce 3,000 unit of bagel per week for 48 weeks of operation per year. You aim to stay in this business for five years. You can either make the dough for the bagels in house or buy them from a different source. If you make the dough in house, you face with annual labour costs: $30,000, annual safety regulation costs: $5,000 and annual material costs: $20,000. But, if you choose to buy the dough from a different source, you must have a special dough-mixer machine to make adjustment for your production. Therefore, you need to pay $5,000 for the dough mixer machine, which has $1,000 salvage value at the end of 5 years. Furthermore, you face with annual maintaining costs including labour costs: $20,000 and additional overhead costs: $10,000 Using this information, find the unit cost of buy the bagel option with MARR 20%. Question 4 options: a) Between $0.70 and $0.80 b) None of the answers are correct…
Santa Fe Company, a farm-equipment manufacturer, currently produces 20,000 units of gas filters for use in its lawnmower production annually. The following costs are reported according to the previous year's production: It is anticipated that gas-filter production will last five years. If the company continues to produce the product in-house, annual direct-material costs will increase at a rate of 5%. (For example, the annual direct-material costs during the first production year will be $63,000.) In addition, direct-labor costs will increase at a rate of 6% per year, and variable-overhead costs will increase at a rate of 3% while fixed-overhead costs will remain at the current level over the next five years. Tompkins Company has offered to sell Santa Fe Company 20,000 units of gas filters for $25 per unit. If Santa Fe accepts the offer, some of the facilities currently used to manufacture the gas filters could be rented to a third party at an annual rate of $35,000. In addition,…
Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost perbracket per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. Upon hearing that Ross White is considering the producing the brackets in-house, the supplier has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross purchasethe brackets in lots of 1000. i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000 at $14.50 each? ii) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
Brittany is co-oping this semester at Regency Aircraft, which customizes the interiors of private and corporate jets. Her first assignment is to developthe specifications for a new machine to cut, shape, and sew leather or vinyl covers and trims. The first cost is not easy to estimate due to many options,but the annual revenue and M&O costs should net out at $15,000 per year over a 10-year life. Salvage is expected to be 20% of the first cost. Determine what can be paid for the machine now to recover the cost and an MARR of 8% per year under two scenarios:I: No outside revenue will be developed.II: Outside contracting will occur with estimated revenue of $10,000 the first year, increasing by $5000 per year thereafter. Solve using (a) tabulated factors, and (b) a spreadsheet and the GOAL SEEK tool.
Three machines are employed in an isolated area. They each produce 2000 units of output per month, the first requiring $20,000 in raw materials, the 2nd $25,000, and the 3rd $28,000. What would you expect to be the monthly charge for the first and second machines if the services of the third machine can be hired at a price of $9000 per month? Which parts of the charges for the first two machines are economic rent?
The owner of Warwick Printing is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: Each color on the banner must be printed one at a time. Thus, for example, a four-color banner will need to be run through the printing operation four separate times. The total production volume last year was 800, as follows: The four-color banner is a new product offering for the upcoming year. The owner believes that the expected 1,000-unit increase in volume fromlast year means that direct labor expenses should increase bu 125% (1,000/800). What do you think?