Tanck Industries manufactures and sells three different models of wet dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Product Economy Standard Deluxe Selling price $45 $75 $149 Variable costs and expenses $24 $30 $69 Machine hours required 0.5 0.8 1.6 (a1) Calculate contribution margin per unit.

Tanck Industries manufactures and sells three different models of wet dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Product Economy Standard Deluxe Selling price $45 $75 $149 Variable costs and expenses $24 $30 $69 Machine hours required 0.5 0.8 1.6 (a1) Calculate contribution margin per unit.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EA: Zena Technology sells arc computer printers for $55 per unit. Unit product costs are: A special...

See similar textbooks

Similar questions

Zena Technology sells arc computer printers for $55 per unit. Unit product costs are: A special order to purchase 15,000 arc printers has recently been received from another company and Zena has idle capacity to fill the order. Zena will incur an additional $2 per printer for additional labor costs due to a slight modification the buyer wants made to the original product. One-third of the manufacturing overhead costs is fixed and will be incurred no matter how many units are produced. When negotiating the price, what is the minimum selling price that Zena should accept for this special order?
Grundvig Manufacturing produces several types of bolts used in aircraft. The bolts are produced in batches and grouped into three product families. Because the product families are used in different kinds of aircraft, customers also can be grouped into three categories, corresponding to the product family that they purchase. The number of units sold to each customer class is the same. The selling prices for the three product families range from 0.50 to 0.80 per unit. Historically, the costs of order entry, processing, and handling were expensed and not traced to individual customer groups. These costs are not trivial and totaled 9,000,000 for the most recent year. Recently, the company started emphasizing a cost reduction strategy with an emphasis on creating a competitive advantage. Upon investigation, management discovered that order-filling costs were driven by the number of customer orders processed with the following cost behavior: Step-fixed cost component: 50,000 per step (2,000 orders define a step) Variable cost component: 20 per order Grundvig currently has sufficient steps to process 200,000 orders. The expected customer orders for the year total 200,000. The expected usage of the order-filling activity and the average size of an order by customer category follow: As a result of cost behavior analysis, the marketing manager recommended the imposition of a charge per customer order. The charge was implemented by adding the cost per order to the price of each order (computed by using the projected ordering costs and expected orders). This ordering cost was then reduced as the size of the order increased and was eliminated as the order size reached 2,000 units. Within a short period of communicating this new price information to customers, the average order size for all three product families increased to 2,000 units. Required: 1. CONCEPTUAL CONNECTION Grundvig traditionally has expensed order-filling costs. What is the most likely reason for this practice? 2. Calculate the cost per order for each customer category. (Note: Round to two decimal places.) 3. CONCEPTUAL CONNECTION Calculate the reduction in order-filling costs produced by the change in pricing strategy (assuming that resource spending is reduced as much as possible and that the total units sold remain unchanged). Explain how exploiting customer activity information produced this cost reduction. Would any other internal activities benefit from this pricing strategy?
Ivanhoe Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Ivanhoe is currently operating at full capacity with limited machine time. Sales and production information relevant to each model is as follows: Product Economy Standard Deluxe Selling price $31.00 $53.20 $97.90 Variable costs and expenses $13.50 $18.00 $41.50 Machine hours required 0.50 0.80 1.60 Ignoring the machine time constraint, which single product should Ivanhoe Industries produce? Ivanhoe Industries should produce select a product . What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, e.g. 15.75.) Model Contribution Margin…
Blossom Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Blossom is currently operating at full capacity with limited machine time. Per unit sales and production information relevant to each model follows. Selling price Variable costs and expenses Machine hours required Economy $32 $17 0.50 Product Standard $53 $21 0.80 Deluxe $105 $49 1.60 Calculate unit contribution margin.
XYZ's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars for P2.00. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars: Direct materials 1.06 Direct labor 0.08 Unit-related support costs 0.25 Batch-related support costs 0.24 Product-sustaining support costs 0.44 Facility-sustaining support costs 0.50 Total cost per jar 2.57 1. The net advantage (disadvantage) of accepting the supplier’s offer is? 2. The maximum price that XYZ's Preserves should be willing to pay for the decorative jars is?
Unter Components manufactures low-cost navigation systems for installation in ride-sharing cars. It sells these systems to various car services that can customize them for their locale and business model. It manufactures two systems, the Star100 and the Star150, which differ in terms of capabilities. The following information is available. Costs per unit Star100 Star150 Direct materials $ 130 $ 150 Direct labor 60 80 Variable overhead 30 40 Fixed overhead 180 240 Total cost per unit $ 400 $ 510 Price $ 580 $ 780 Units sold 4,000 2,000 The average wage rate is $40 per hour. Variable overhead varies with the quantity of direct labor-hours. The plant has a capacity of 20,000 direct labor-hours, but current production uses only 10,000 direct labor-hours. Required: a. A nationwide car-sharing service has offered to buy 2,500 Star100 systems and 2,500 Star150 systems if the price is lowered to $400 and…
Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows: Product A Product B Product C Sales price $ 52.00 $ 62.00 $ 92.00 Variable costs per unit 17.60 10.75 25.60 Fixed costs per unit 8.00 8.00 8.00 Required number of labor hours 2.00 2.50 4.00 Cordova currently is limited to 60,000 labor hours per month. Cordova’s marketing department has determined the following demand for its products: Product A 10,000 units Product B 10,000 units Product C 6,000 units Required:Given the company’s limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first. Round your answers to the nearest whole number.) products units produced
Kitchen Magician, Inc., has assembled the following data pertaining to its two most popular products. Blender 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?2. With all other things constant, if management is able to reduce the direct material for a mixer to $6 per unit, how many units of each product should be manufactured?…
Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows: Product A Product B Product C Sales price $ 47.00 $ 57.00 $ 87.00 Variable costs per unit 22.70 12.00 38.70 Fixed costs per unit 9.00 9.00 9.00 Required number of labor hours 1.50 2.50 3.00 Cordova currently is limited to 58,500 labor hours per month. Cordova’s marketing department has determined the following demand for its products: Product A 14,000 units Product B 9,000 units Product C 10,000 units Required:Given the company’s limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first. Round your answers to the nearest whole number.) Product Units Produced
Decorative Doors Ltd produces two types of doors: interior and exterior. The company’s costing system has two direct-cost categories (materials and labour) and one indirect-cost pool. The costing system allocates indirect costs on the basis of machine-hours. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Decorative Doors production for the most recent year is as follows: Particulars Interior Exterior Units sold 3200 1800 Selling price $125 $200 Direct material cost per unit $30 $45 Direct production labour cost per hour5 $16 $16 Direct production labour-hours per unit 1.50 2.25 Production runs 40 85 Material moves 72 168 Machine set-ups 45 155 Machine-hours 5500 4500 Number of inspections 250 150 The owners have heard of other companies in the industry that are now…
Each year, Basu Company produces 24,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.17. The unit cost is: Direct materials $0.72 Direct labor 0.25 Variable overhead 0.13 Fixed overhead 2.95 Total unit cost $4.05 Required: 1. What are the alternatives for Basu Company? 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. List the relevant cost(s) of external purchase. 3. Which alternative is more cost effective and by how much? _____ by $___ 4. What if $18,560 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much? ____ by $____
Product mix, special order. (N. Melumad, adapted) Gormley Precision Tools makes cuttingtools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a highprecisioncutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both theregular machine and a high-precision machine. The following information is available: A6 EX4 $ 200 $ 300 Selling price $ 120 $ 200 Variable manufacturing cost per unit $ 30 $ 70 Variable marketing cost per unit 1.0 0.5 Hours required to produce one unit on the regular machine $700,000 $1,100,000 Budgeted total fixed overhead costs Additional information includes the following:a. Gormley faces a capacity constraint on the regular machine of 50,000 hours per year.b. The capacity of the high-precision machine is not a constraint.c. Of the $1,100,000 budgeted fixed overhead costs of EX4, $600,000 are lease payments for the highprecisionmachine. This cost is charged…