Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 20, Problem 25P
Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each product’s unit contribution margin is as follows:
Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming year’s production. There is no other source of the material.
Required:
- 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material.
- 2. Determine the optimal usage of the company’s inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend.
- 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year.
- a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints.
- b. Solve the linear programming problem using the graphical approach.
- c. Compute the total contribution margin produced by the optimal mix.
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McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.Instructions1. Using the net realizable value method, allocate the joint costs of production to each product. 2. Explain why McKenzie’s Soap Sensations, Inc.,…
McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.
1. Using the net realizable value method, allocate the joint costs of production to each product.
2. Using the Market Value at Split Off Point Method, allocate…
McKenzie’s Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively.
1. Using the net realizable value method, allocate the joint costs of production to each product. Round your answers to two decimal places.
Joint Product…
Chapter 20 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 20 - What are ordering costs? What are setup costs?...Ch. 20 - Explain why, in the traditional view of inventory,...Ch. 20 - Discuss the traditional reasons for carrying...Ch. 20 - Prob. 4DQCh. 20 - Explain how safety stock is used to deal with...Ch. 20 - Prob. 6DQCh. 20 - What approach does JIT take to minimize total...Ch. 20 - One reason for inventory is to prevent shutdowns....Ch. 20 - Prob. 9DQCh. 20 - Explain how long-term contractual relationships...
Ch. 20 - What is a constraint? An internal constraint? An...Ch. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Explain how lowering inventory produces better...Ch. 20 - Prob. 15DQCh. 20 - Thomas Corporation produces heating units. The...Ch. 20 - Sterling Corporation has an EOQ of 5,000 units....Ch. 20 - Patz Company produces two types of machine parts:...Ch. 20 - Prob. 4CECh. 20 - See Cornerstone Exercise 20.4. Fisher Company has...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Melchar Company uses 78,125 pounds of oats each...Ch. 20 - Prob. 9ECh. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Refer to Exercise 20.10. Assume the economic lot...Ch. 20 - Eyring Manufacturing produces a component used in...Ch. 20 - Hales Company produces a product that requires two...Ch. 20 - Many companies have viewed JIT as a panaceaa...Ch. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Which of the following describes the economic...Ch. 20 - The economic order quantity (EOQ) for Part X15 is...Ch. 20 - A JIT inventory management system maintains which...Ch. 20 - For the theory of constraints, which of the...Ch. 20 - A dedicated pharmaceutical plant uses the theory...Ch. 20 - Prob. 23PCh. 20 - Burnett Company produces two types of gears: Model...Ch. 20 - Taylor Company produces two industrial cleansers...Ch. 20 - Prob. 26PCh. 20 - Calen Company manufactures and sells three...Ch. 20 - Confer Company produces two different metal...Ch. 20 - Pratt Company produces two replacement parts for a...Ch. 20 - Bountiful Manufacturing produces two types of bike...
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