Question 1 - Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.
|
|
Blender
|
Electric Mixer
|
|
Direct material
|
$19
|
$26
|
|
Direct labor
|
12
|
40
|
|
Manufacturing overhead @ $48 per machine hour
|
48
|
96
|
|
Cost if purchased from an outside supplier
|
66
|
130
|
|
Annual demand (units)
|
35,000
|
42,000
|
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $24. Kitchen Magician's management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
Required:
1. If 74,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
2. With all other things constant, if management is able to reduce the direct material for an electric mixer to $19 per unit, how many units of each product should be manufactured? Purchased?
Question 2 - Johnson and Gomez, Inc. is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation.
During the past 15 months, a new product has been under development that allows users improved access to e-mail and video images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing two models: Basic and Enhanced. Development costs have amounted to $198,000 and $279,000, respectively. The total market demand for each model is expected to be 51,000 units, and management anticipates being able to obtain the following market shares: Basic, 25 percent; Enhanced, 20 percent. Forecasted data follow.
|
Basic
|
Enhanced
|
|
Projected selling price
|
$400
|
$500
|
|
Per-unit production costs:
|
|
|
|
Direct material
|
53
|
84
|
|
Direct labor
|
28
|
41
|
|
Variable overhead
|
47
|
59
|
|
Marketing and advertising (fixed but avoidable)
|
206,000
|
355,000
|
|
Sales commissions*
|
15
|
20
|
*Computed on the basis of sales dollars.
Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Johnson and Gomez paying $35,600 for an in-depth market study. Sales salaries (excluding commission) will be $91,000 no matter which product is sold. The marketing and advertising costs indicated for each product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of which product is introduced.
Required: Compute the unit contribution margin for both models.
Question 3 - Johnson and Gomez, Inc. is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation.
During the past 15 months, a new product has been under development that allows users improved access to e-mail and video images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing two models: Basic and Enhanced. Development costs have amounted to $198,000 and $279,000, respectively. The total market demand for each model is expected to be 51,000 units, and management anticipates being able to obtain the following market shares: Basic, 25 percent; Enhanced, 20 percent. Forecasted data follow.
|
|
Basic
|
Enhanced
|
|
Projected selling price
|
$400
|
$500
|
|
Per-unit production costs:
|
|
|
|
Direct material
|
53
|
84
|
|
Direct labor
|
28
|
41
|
|
Variable overhead
|
47
|
59
|
|
Marketing and advertising (fixed but avoidable)
|
206,000
|
355,000
|
|
Sales commissions*
|
15%
|
20%
|
*Computed on the basis of sales dollars.
Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Johnson and Gomez paying $35,600 for an in-depth market study. Sales salaries (excluding commission) will be $91,000 no matter which product is sold. The marketing and advertising costs indicated for each product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of which product is introduced.
Which of the following should be ignored in making the product-introduction decision? (You may select more than one answer) Highlight the correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Development costs unchecked Market study unanswered Marketing and Advertising unanswered Fixed manufacturing overhead unanswered Variable manufacturing overhead unanswered Sales salaries
Development costs
Market study
Marketing and Advertising
Fixed manufacturing overhead
Variable manufacturing overhead
Sales salaries
Question 4 - Johnson and Gomez, Inc. is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation.
During the past 15 months, a new product has been under development that allows users improved access to e-mail and video images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing two models: Basic and Enhanced. Development costs have amounted to $198,000 and $279,000, respectively. The total market demand for each model is expected to be 51,000 units, and management anticipates being able to obtain the following market shares: Basic, 25 percent; Enhanced, 20 percent. Forecasted data follow.
|
|
Basic
|
Enhanced
|
|
Projected selling price
|
$400
|
$500
|
|
Per-unit production costs:
|
|
|
|
Direct material
|
53
|
84
|
|
Direct labor
|
28
|
41
|
|
Variable overhead
|
47
|
59
|
|
Marketing and advertising (fixed but avoidable)
|
206,000
|
355,000
|
|
Sales commissions*
|
15%
|
20%
|
*Computed on the basis of sales dollars.
Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Johnson and Gomez paying $35,600 for an in-depth market study. Sales salaries (excluding commission) will be $91,000 no matter which product is sold. The marketing and advertising costs indicated for each product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of which product is introduced.
Required -
Prepare a financial analysis and determine which of the two models should be introduced.
The company would be advised to select the Enhanced model or Basic model?
Prepare a financial analysis and determine which of the two models should be introduced.
Questions 5 - Johnson and Gomez, Inc. is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation.
During the past 15 months, a new product has been under development that allows users improved access to e-mail and video images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing two models: Basic and Enhanced. Development costs have amounted to $198,000 and $279,000, respectively. The total market demand for each model is expected to be 51,000 units, and management anticipates being able to obtain the following market shares: Basic, 25 percent; Enhanced, 20 percent. Forecasted data follow.
|
|
Basic
|
Enhanced
|
|
Projected selling price
|
$400
|
$500
|
|
Per-unit production costs:
|
|
|
|
Direct material
|
53
|
84
|
|
Direct labor
|
28
|
41
|
|
Variable overhead
|
47
|
59
|
|
Marketing and advertising (fixed but avoidable)
|
206,000
|
355,000
|
|
Sales commissions*
|
15%
|
20%
|
*Computed on the basis of sales dollars.
Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Johnson and Gomez paying $35,600 for an in-depth market study. Sales salaries (excluding commission) will be $91,000 no matter which product is sold. The marketing and advertising costs indicated for each product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of which product is introduced.
What other factors should Johnson and Gomez, Inc. consider before a final decision is made? (You may select more than one answer) Highlight the correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Question 6 - Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter's and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Jupiter's model no. 43 skateboard follow.
|
Direct material
|
$8.2
|
|
Direct labor: 0.25 hours at $9.00
|
2.25
|
|
Total manufacturing overhead: 0.5 hours at $20
|
10
|
|
Total
|
$20.45
|
Additional data:
The normal selling price of model no. 43 is $26.50; however, Venus has offered Jupiter only $15.75 because of the large quantity it is willing to purchase.
Venus requires a modification of the design that will allow a $2.10 reduction in direct-material cost.
Jupiter's production supervisor notes that the company will incur $3,700 in additional setup costs and will have to purchase a $2,400 special device to manufacture these units. The device will be discarded once the special order is completed.
Total manufacturing overhead costs are applied to production at the rate of $20 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $750,000 and planned production activity of 60,000 machine hours (5,000 per month).
Jupiter will allocate $1,800 of existing fixed administrative costs to the order as "... part of the cost of doing business."
Required:
Calculate the net profit increase or (decrease) from accepting the special order.
Assume that present sales will not be affected. Should the order be accepted from a financial point of view (i.e., is it profitable)?
Calculate the net profit increase or (decrease) from accepting the special order. (Do not round intermediate calculations.)
Question 7 - Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter's and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Jupiter's model no. 43 skateboard follow.
|
Direct material
|
$8.2
|
|
Direct labor: 0.25 hours at $9.00
|
2.25
|
|
Total manufacturing overhead: 0.5 hours at $20
|
10
|
|
Total
|
$20.45
|
Additional data:
The normal selling price of model no. 43 is $26.50; however, Venus has offered Jupiter only $15.75 because of the large quantity it is willing to purchase.
Venus requires a modification of the design that will allow a $2.10 reduction in direct-material cost.
Jupiter's production supervisor notes that the company will incur $3,700 in additional setup costs and will have to purchase a $2,400 special device to manufacture these units. The device will be discarded once the special order is completed.
Total manufacturing overhead costs are applied to production at the rate of $20 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $750,000 and planned production activity of 60,000 machine hours (5,000 per month).
Jupiter will allocate $1,800 of existing fixed administrative costs to the order as "... part of the cost of doing business."
Assume that Jupiter's current production activity consumes 70 percent of planned machine-hour activity. Calculate the current available machine-hours.
Can the company accept the order and meet Venus' deadline?
Assume that Jupiter's current production activity consumes 70 percent of planned machine-hour activity. Calculate the current available machine-hours.
Question 8 - Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter's and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Jupiter's model no. 43 skateboard follow.
|
Direct material
|
$8.2
|
|
Direct labor: 0.25 hours at $9.00
|
2.25
|
|
Total manufacturing overhead: 0.5 hours at $20
|
10
|
|
Total
|
$20.45
|
Additional data:
The normal selling price of model no. 43 is $26.50; however, Venus has offered Jupiter only $15.75 because of the large quantity it is willing to purchase.
Venus requires a modification of the design that will allow a $2.10 reduction in direct-material cost.
Jupiter's production supervisor notes that the company will incur $3,700 in additional setup costs and will have to purchase a $2,400 special device to manufacture these units. The device will be discarded once the special order is completed.
Total manufacturing overhead costs are applied to production at the rate of $20 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $750,000 and planned production activity of 60,000 machine hours (5,000 per month).
Jupiter will allocate $1,800 of existing fixed administrative costs to the order as "... part of the cost of doing business."
What options might Jupiter consider if management truly wanted to do business with Venus in hopes of building a long-term relationship with the firm? (You may select more than one answer) Highlight the correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Completely ignore the additional setup costs and the new device costs, as these are fixed in nature
Working overtime
Outsourcing some units
Acquiring more machine capacity
Sacrificing some current business in the hope that a long-term relationship with Venus can be established and proves to be profitable
Attachment:- Assignment.rar