Question : 102.              Transcom Corporation sells three types of intercom systems, the : 1369904

 

102.              Transcom Corporation sells three types of intercom systems, the deluxe model, the superior model and the regular model. The profit report for these intercom systems for the most recent period is shown below by product line.  The facility sustaining costs are fixed and allocated equally between each of the three product lines.

 

 

Superior

Deluxe

 

Regular

Sales

$200,000

$95,000

 

$155,000

Variable Costs

110,000

60,000

 

105,000

Contribution Margin

$90,000

$35,000

 

$50,000

Facility Sustaining Cost

50,000

50,000

 

50,000

Net Income (Loss)

$40,000

$(15,000

)

$-0-

 

 

 

 

 

 

Transcom has reviewed the data above and is trying to determine whether or not to drop the deluxe and regular models of their intercom system.  Should Transcom drop one or both of the product lines?  Justify your position given the data you have above.

 

103.  WyKan Corporation sells three types of speaker systems, the Model A, the Model B and the Model C. The profit report for these speaker systems for the most recent period is shown below by product line.  The facility sustaining costs are fixed and allocated as shown below between each of the three product lines.

 

 

Model A

Model B

 

Model C

Sales

$200,000

$95,000

 

$155,000

Variable Costs

110,000

60,000

 

154,000

Contribution Margin

$90,000

$35,000

 

$1,000

Facility Sustaining Cost

50,000

30,000

 

70,000

Net Income (Loss)

$40,000

$5,000

 

$(71,000)

 

 

 

 

 

 

WyKan has analyzed the data wants to determine whether or not to drop Model C speakers of their line of product.  What action should WyKan take?  Justify your position given the data you have above.

104.               Durango Company manufactures several products, one of which is a western style saddle. Total production costs for 5,000 saddles are as follows:

 

Direct materials

$2,200,000

Direct labor

1,700,000

Variable Overhead

1,400,000

Facility sustaining cost

700,000

Total

$6,000,000

 

 

 

Durango has been approached by a supplier who will sell the same saddle to Durango for $1,100 per saddle.  Assume that Durango could rent its manufacturing facilities for $350,000 per year.  Should Durango continue to make the saddle or should they buy the saddles?  Explain the basis of your decision.

 

105.              Kampalot, Inc. manufactures pop-up campers. One of the component parts, RV3, is produced in-house by Kampalot. A supplier has approached the company with an offer to supply the RV3 part at a price of $45 per unit. Kampalot’s current costs to manufacture the 20,000 RV3 parts it needs each year are:

 

Direct materials

$   420,000

Direct labor

260,000

Variable overhead

180,000

Facility Sustaining Cost

240,000

Total

$1,100,000

 

 

 

Assuming there is no alternative use for its current production facilities, determine whether Kampalot should purchase the part from the supplier or continue making the part. Alternatively, if the facilities Kampalot uses to produce part RV3 could be rented for $75,000 per year, should the company continue to produce the part or purchase it instead?