Question : SHORT ANSWER. Write the word or phrase that best completes each : 1196070

 

SHORT ANSWER.

Write the word or phrase that best completes each statement or answers the question. 73)

Chalet Ski & Patio manufactures a product that has two parts, X and Y. It is currently considering two alternative proposals related to parts X and Y.

The first proposal is for buying part Y. This would free up some of the plant space for the manufacture of more of part X and assembly of the final product. The product vice-president believes the additional production of the final product can be sold at the current market price. No other changes in manufacturing would be needed.

The second proposal is for buying new equipment for the production of part Y. The new equipment requires fewer workers and uses less power to operate. The old equipment has a net disposal value of zero.

 

Required:

 

Tell whether the following items are relevant or irrelevant for each proposal. Treat each proposal independently.

 

a.Sales revenue of the product.

b.Variable costs of assembling final products.

c.Direct manufacturing materials, part X.

d.Direct manufacturing materials, part Y.

e.Direct manufacturing labour, part X.

f.Direct manufacturing labour, part Y.

g.Variable manufacturing overhead, part X.

h.Variable manufacturing overhead, part Y.

i.Cost of old equipment for manufacturing Y.

j.Cost of new equipment for manufacturing Y.

k.Variable selling and administrative costs. 73)

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74)

Clearwater Company operates a wine outlet in a tourist area. One litre bottles sell for $12. Daily fixed costs are $3,000, and variable costs are $6 per litre. An average of 750 litres are sold each day. Clearwater has a capacity of 800 litres per day.

 

Required:

 

a.Determine the average cost per bottle.

b.A bus loaded with 40 senior citizens stops by at closing time and the tour director offers Clearwater $300 for 40 litres. Clearwater refuses, saying they would lose $2.50 on each litre. Is Clearwater correct about the $2.50? Why or why not?

c.A fund-raising organization has offered Clearwater a one-year contract to buy 300 litres a day for $7.50 each. Should they accept the offer? Why or why not? 74)

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75)

Axle and Wheel Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:

 

Direct materials$33

Direct labour15

Variable manufacturing support24

Fixed manufacturing support52

 

 

Total manufacturing costs124

Markup (50%)62

Targeted selling price$186

 

Axle and Wheel Manufacturing has excess capacity.

 

Required:

a.What is the full cost of the product per unit?

b.What is the contribution margin per unit?

c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?

d.For Axle and Wheel Manufacturing, what is the minimum acceptable price of this one-time-only special order?

e.For this one-time-only special order, should Axle and Wheel Manufacturing consider a price of $100 per unit? Why or why not?

 

 75)

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76)

Nall Custom Pool, Inc. needs 10,000 units of a certain part for its manufacturing process. It can buy the part from Wholesale Pool Supplies and Equipment for $53. Nall’s plant can manufacture the part for the following costs per unit:

 

Direct materials$ 6

Direct manufacturing labour24

Variable manufacturing overhead12

Fixed manufacturing overhead15

Total$57

 

If Nall buys the part from Wholesale, 60 percent of the fixed manufacturing overhead applied will continue to be incurred.

 

Required:

 

What is the relevant dollar difference between making and buying the part? 76)

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77)

Car Parts Company manufactures a part for use in its production of automobiles. The costs per unit when 10,000 items are produced are:

 

Direct materials$ 6

Direct manufacturing labour30

Variable manufacturing overhead12

Fixed manufacturing overhead16

Total$64

 

Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60. The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer. In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated.

 

Required:

 

a.What is the relevant per unit cost for the original part?

b.Which alternative is best for Car Parts Company? By how much? 77)

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78)

Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large one-time-only

special order for a product similar to one offered to regular customers. The following per unit data apply

for sales to regular customers:

 

Direct materials$100

Direct labour125

Variable manufacturing support60

Fixed manufacturing support75

 

 

Total manufacturing costs360

Markup (60%)216

Targeted selling price$576

 

Silver Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.

 

Required:

a.For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?

b.Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order?

c.How would the analysis differ if there was limited capacity?

 

 78)

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79)

A florists produces table settings for weddings. Based on an annual volume of 10,000 units it incurs $100,000 in fixed manufacturing costs. Variable costs per unit are $16 for direct materials, $3 for direct manufacturing labour, and $14 for variable factory overhead.

 

Another company has offered to supply empty baskets for the settings for $8, with a minimum annual order of 5,000 units. If the florist accepts the offer, it will be able to reduce variable labour and overhead costs by 50 percent. The materials for the empty baskets will cost $4 if the florist assembles them.

 

Requirements:

 

a.Determine if they should make or assemble the empty baskets.

b.Should they make or assemble the empty baskets if they could rent the space that the basket assembly requires for $16,000 per year to another company? 79)

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80)

Southwestern Company needs 1,000 motors in its manufacture of automobiles.

It can buy the motors

from Jinx Motors for $1,250 each.

Southwestern’s plant can manufacture the motors for the following

costs per unit:

 

Direct materials$

500

Direct manufacturing labour 250

Variable manufacturing overhead 200

Fixed manufacturing overhead

 

350

Total$1,300

 

If Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead applied will not be avoided.

 

 

Required:

a.Should the company make or buy the motors?

b.What additional factors should Southwestern consider in deciding whether or not to make or buy the motors?

 80)

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