Question : 72. Castleberry Products manufactures three product lines: A, B, and C. : 1291721

 

72. Castleberry Products manufactures three product lines: A, B, and C. The following information is available for each product line: 

 

A

 

B

 

C

 

Total

Sales

$500,000

 

$350,000

 

$400,000

 

$1,250,000

Variable costs

  175,000

 

   240,000

 

  200,000

 

     615,000

Contribution margin

325,000

 

110,000

 

200,000

 

635,000

Fixed costs

  120,000

 

   120,000

 

  100,000

 

     340,000

Net income

$205,000

 

$ (10,000)

 

$100,000

 

$   295,000

 

 

 

 

 

 

 

 

Management is considering dropping product line B.Required: 

A.

What is one qualitative factor that Castleberry should consider before dropping product line B?

 

 

B.

If it is determined that all of product line B’s fixed costs are avoidable, what would be the effect on the company’s overall net income if it were dropped?

 

 

C.

If it is determined that none of product line B’s fixed costs are avoidable, what would be the effect on the company’s overall net income if it were dropped?

 

 

D.

If it is determined that $80,000 of product line B’s fixed costs are avoidable, what would be the effect on the company’s overall net income if it were dropped?

 

 

 

 

 

73. Grissom Products installs standard and deluxe storage sheds. Selected data related to each product is as follows: 

 

Standard

 

Deluxe

Sales price per unit

$2,000

 

$4,000

Direct materials cost per unit

350

 

600

Direct labor cost per unit

250

 

350

Variable overhead cost per unit

100

 

200

Direct labor hours per unit

4 hours

 

6 hours

 

 

 

 

Most of the installation process of the sheds is done using manual labor. There are a maximum of 24,000 direct labor hours available each year.Required:

A.

If there is unlimited demand for both products, how many of each type of shed should be installed in order to maximize profits?

 

 

B.

If the company believes that there is sufficient demand for up to 4,000 standard and 2,500 deluxe sheds each year, how many of each type should be installed in order to maximize profits?

 

 

 

 

 

74. Zing Inc. produces both soft and firm twin-size mattresses. Selected data related to each product is as follows: 

 

Soft

 

Firm

Sales price per unit

$400

 

$500

Direct materials per unit

95

 

110

Direct labor per unit

35

 

55

Variable overhead per unit

15

 

20

Direct labor hours per unit

30 minutes

 

45 minutes

 

 

 

 

Most of the stuffing process is done by hand. There are a maximum of 2,400,000 direct labor minutes available each year.Required:

A.

If there is unlimited demand for both products, how many of each type of mattress should be produced in order to maximize profits?

 

 

B.

If the company believes that there is sufficient demand for up to 35,000 soft and 33,000 firm mattresses each year, how many of each type should be installed in order to maximize profits?

 

 

 

 

 

75. Sugarhill Products makes a wood product in three sizes: small, medium, and large. Currently, the company does not stain any of the products, but market research has indicated that they can be sold with or without a finishing stain. The following information is available: 

 

Small

 

Medium

 

Large

Initial sales price

$1,500

 

$2,300

 

$4,000

Initial cost

500

 

800

 

1,300

Sales price after staining

1,650

 

2,400

 

4,400

Cost of staining

100

 

190

 

300

 

 

 

 

 

 

Number sold per year

300

 

300

 

150

 

 

 

 

 

 

Required: 

A.

Which products should be stained? Support your answer with calculations.

 

 

B.

If all the products are stained, what is the overall effect on net income? Support your answer with calculations.

 

 

 

 

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