EBK CORNERSTONES OF COST MANAGEMENT
3rd Edition
ISBN: 9781305147102
Author: MOWEN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 20, Problem 3CE
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of $300 and $600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week.
Required:
- 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint.
- 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix.
- 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
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Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of $400 and $800, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 400 assembly hours per week.
Required:
1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint.
Objective function: Max Z = $400 A + $800 B
Subject to: fill in the blank 1 A + fill in the blank 2 B ≤ fill in the blank 3
2. Identify the optimal amount that should be produced of each machine part. If none of the components should be produced, enter "0" for your answer.
Component A
fill in the blank 4
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Component B
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Identify the total contribution margin associated with this mix.$fill in the blank 6
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,300 containers follows.
Unit-level materials.
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each.
Required
a. Calculate the total relevant cost. Should Rundle continue to make the containers?
b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate
the total avoidable costs. Should Rundle continue to make the containers?
Answer is complete but not entirely correct.
$
a. Total relevant cost
a. Should Rundle continue to make the containers?
b. Total avoidable cost
b. Should Rundle continue to make the containers?
190.650,000
Yes
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6,100
4,000
7,800…
Chapter 20 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
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 - Prob. 18ECh. 20 - The economic order quantity (EOQ) for Part X15 is...Ch. 20 - Prob. 20ECh. 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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