1.)Elegance Bath Products (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have a variable cost of $80. The tubs sell for $600 and have variable costs of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of molding time; a tub uses and average of 5 hour of molding time.
What is the contribution margin per hour of molding time for sinks?
2.)Elegance Bath Products (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have a variable cost of $80. The tubs sell for $600 and have variable costs of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of molding time; a tub uses and average of 5 hour of molding time.
What is the contribution margin per hour of molding time for tubs?
3.)Elegance Bath Products (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have a variable cost of $80. The tubs sell for $600 and have variable costs of $450. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The equipment has 4,050 hours of capacity per year. A sink uses an average of 2 hours of molding time; a tub uses and average of 5 hour of molding time.
A) Assume that EBP can sell as many as 1,000 sinks and 500 tubs per year. How many tubs should EBP produce?
B) Assuming that molding time is the only constrained resource, and that EBP can sell as many tubs and sinks that is can produce, how many sinks should be produced?
4.) Bell Company makes fax machines. Currently, Bell makes all components of the fax machines in house. An outside company has offered to supply one component, part number B48, for $8 each. Bell uses 15,000 of these components per year. Costs of B48 are as follows:
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Direct materials
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$4.00
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Direct labor
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2.00
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Variable overhead
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1.50
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Fixed overhead
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3.00
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A) Suppose that 40% of the fixed overhead is avoidable if part B48 is not made by Bell. Should Bell purchase the part from the outside supplier?
B) Assume that all of the fixed overhead is allocated and cannot be avoided. Should Bell purchase the part from the outside supplier?