Question : CHALLENGE EXERCISES 189.Sharply Knives produces two models of titanium knives, Ginsu : 1302739

CHALLENGE EXERCISES

189.Sharply Knives produces two models of titanium knives, Ginsu and Deluxe. Information regarding the products is summarized for the month of May in the following table:

DeluxeGinsuTotal

Number of knives2,5001,5004,000

Sales revenue$ 88,000$66,000$154,000

Variable costs30,80029,70060,500

Fixed costs22,90011,40034,300

Operating income$34,300$24,900$ 59,200

Contribution margin per unit$22.88$24.20$23.38

Contribution margin ratio65.00%55.00%60.71%

Profit per knife$13.72$16.60

Ounces of titanium per knife7.59

Due to a strike, only 24,750 ounces of titanium will be available during each of the next few months. Each ounce of titanium costs $0.70.

a. Given the limited resource, of which product should Sharply produce more? Support with calculations and provide sufficient conceptual justification why this product should be chosen.

b. Assume Sharply needs to produce at least 750 of each model per month to stay competitive and it can sell all it produces. Assume that you chose Deluxe knives as your answer to part a. Show the calculation of how many deluxe knives that Sharply should produce to maximize profits.

190.MusicRx produces two MP3 players, standard and mini. Information regarding the products is summarized for the month of April in the following table:

StandardMiniTotal

Sales revenue$126,000$84,000$210,000

Variable costs30,80029,70060,500

Fixed costs36,40028,00064,400

Operating income$ 58,800     $26,300$ 85,100

Contribution margin ratio75.56%64.64%

Contribution margin per unit$31.73$10.86

MusicRx sells 3 standard MP3 players for every 5 mini players sold. It generates $3 of sales for standard players for every $2 of mini players. The sales mix is expected to stay stable.

a.How much will total revenue be for MusicRx at break-even? (Round intermediate calculations to four decimal places.)

b.What would be the sales (in dollars) of mini players for total sales calculated in Part a?

c.Suppose that 60 additional standard MP3 players and 100 additional mini MP3 players are sold. By how much will profit increase?

191.The RiverTown Shuttle provides a water taxi across the St. Johns River for $4 per ride. It has provided the following data concerning its costs of operating its water taxi:

JanuaryFebruaryMarchAprilMay

# of riders2,5002,8004,2004,1002,600

Operating costs$7,475$8,120$11,130$11,225$7,390

a.Use the high-low method to answer the following:

1. Variable cost per rider

2. Fixed costs per month

3. Write the cost equation in good form.

b.How many water taxi customers does RiverTown need to generate a profit of $4,190 per month?

192.Duplicator Shipping, Inc. provides 11 inch by 17 inch color copying as an added service at its shipping store for $1.20 cents per copy. Information for two months of operations appears below:

MonthCostNumber of copies

June$6,50011,000

July$7,80015,000

a.Indicate the type of cost behavior of this cost and justify your choice. Include computations.

b.Write the cost equation in good form.

c.Determine the break-even point in units for Duplicator Shipping. (Round to the nearest

d.whole number.)