Q1. Describe the Benefits and Drawbacks of GPK, RCA
Q2. Nasser, Inc. makes electronic chips for smartphone manufacturers. The normal selling price is $55.00 per unit. Nasser was approached by Apple, U.S. smartphone, Inc. Apple wants to buy 10,000 units at $40, and Apple will pay the shipping costs. Suppose that the capacity of Nasser, Inc. is 110,000 units and projected sales to regular customers this year total 97,000 units. The per-unit costs traceable to the product (based on normal capacity of 110,000 units) are listed below.
|
Direct materials
|
$10.00
|
|
Direct labor
|
12.00
|
|
Variable mfg. overhead
|
13.00
|
|
Fixed mfg. overhead
|
9.00
|
|
Shipping/handling
|
5.00
|
|
Fixed administrative costs
|
0.34
|
|
Fixed selling costs
|
0.21
|
|
$49.55
|
- Which costs are relevant to this decision?
- Does the quantitative analysis suggest that the company should accept the special order?
- Write a paragraph explaining 3 qualitative issues related to the above special order, according to your paragraph, might Nasser consider before finalizing its decision?
Q3. Abdullah Motors manufactures cars and currently uses only 50% of its manufacturing facility (20,000 cars). The company could utilize more of its facility by producing its own tires and using the total capacity. It currently purchases tires at $30 per unit. Abdullah would incur $12 per unit for direct materials, $10 for direct labor, and $24 for overhead (which is 30% variable) if it produces the tires.
a. Should Abdullah Motors make or buy the tires? Provide calculations that support your answer.
b. Suppose Abdullah Motors could rent the unused portion of its plant and receive $1,500 a month. Should the company make or buy the tires? Provide calculations that support your answer
c. List two qualitative factors that could affect this decision.
Q4. International Rental Cars incurred the following costs in a recent fiscal period:
Custodial services for branch office in St. Louis 250
Painting costs for luxury sports cars 320
Salaries for corporate accountants 395
Generalized advertising for the firm 460
Depreciation on home office computer equipment 665
Office equipment depreciation for Pasadena branch 775
Market research with business travelers 860
Total $3,725
Calculate the total cost in each of the following categories:
a. Organization-sustaining activities
b. Facility-sustaining activities
c. Customer-sustaining activities
d. Product-sustaining activities