1. Multi-product Corp. packages water filters for cities experiencing water quality problems. Cost data for this packaging process are as follows:
| Annual Cost |
Unit Cost |
| Packaging materials (e.g., boxes, bubble-wrap) |
$313,200 |
$2.005 |
| Packaging direct labor |
98,830 |
$0.633 |
| Indirect materials (e.g., tape, labels) |
$66,620 |
$0.427 |
| Packaging supervision (variable) |
47,840 |
$0.306 |
| Other fixed manufacturing overhead |
211,800 |
$1.356 |
| Total packaging cost |
$738,290 |
$4.727 |
2. An outside supplier has offered to do all the packaging for a price of $4 per unit for all packaging-related activities if Multi-product Corp. signs a one-year contract for a minimum of 156,200 units produced each year. Multi-product Corp. could use the factory space now occupied by the packaging process to expand production to another product line. This expansion is expected to generate an additional $155,000 in profit per year.
3. Make or Buy. What are the total relevant costs of continuing to package the products internally; that is, which of the annual costs are avoidable if Multi-product Corp. outsources the packaging process? (1 point)
4. Make or Buy. What is the net cost of outsourcing the packaging process after considering the profit from expanding production of another product? (1 point)
5. Constrained Resources. Multi-product Corp. is under a time constraint and can only fully produce one of three new products this period. Which of the following products should be fully produced to yield the highest profits for the company?A) Product A has a contribution margin of $20 and it takes 2 machine hours to complete each product. or B) Product B has a contribution margin of $30 and it takes 2 machine hours to complete each product. or C) Product C has a contribution margin of $50 and it takes 2 machine hours to complete each product. A B C