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Ch 16
Assignment D Week 6
Make or Buy
Decision
1. Talk Company manufactures 10,000 telephones per year. The full
manufacturing costs per telephone are as follows:
Direct materials
$ 4
Direct labor
16
Variable manufacturing
overhead
10
Average fixed
manufacturing overhead
11
Total
$41
The Telecom America has
offered to sell Talk Company 10,000 telephones for $34 per unit. If Talk Company accepts the offer, $25,000 of
fixed overhead will be eliminated.
Decide
whether or not Talk Company should make or buy the phones? Prove your case.
Using
Limited Resources
2. Northern
Production Company has 200 labor-hours available. There is no limit on machine-hours. Northern can sell all of Y it wants, but it
can only sell 45 units and 20 units of X and Z, respectively.
Product X
Product Y
Product Z
Contribution margin per
unit
$30
$20
$24
Labor-hours per unit
4
5
4
Machine-hours per unit
10
8
2
A
) What is the contribution margin per labor-hour for product Y?
B)
To maximize profits, how many units of each product should Northern produce?
Outsourcing
Decision
3. The
Coil Company manufactures 10,000 rolls of cable each period. The cable is used as an input for producing
several other products that Coil manufactures.
The full manufacturing costs for a
batch of 100 rollsof cable are:
Direct materials
$170
Direct labor
100
Variable manufacturing
overhead
100
Average fixed
manufacturing overhead
175
Total
$545
The fixed manufacturing overhead is
comprised of depreciation expenses related to prior investments in facilities
and equipment that are used in the manufacturing of the cable. These assets have no other use than for the
manufacturing of the cable. An outside
supplier has offered to sell Coil the 10,000 rolls of cable necessary to meet
production needs this period for a lump-sum of $45,000.
If Coil
accepts this outside suppliers offer, how much better or worse off will the
company be?
Joint Costs
4. The
Kirsten Company uses a joint process to produce products A, B, C, and D. Each product may be sold at its split-off
point or processed further. Joint
processing costs for a single batch of joint products are $65,000. Other relevant data are as follows:
Product
Sales Value
At Split-Off
Additional Costs
of Processing
Sales Value
of Final Product
A
$15,000
$18,000
$ 45,000
B
27,000
15,000
40,000
C
20,000
25,000
30,000
D
13,000
11,000
25,000
$75,000
$69,000
$140,000
Calculate
the effect on profits of processing Product A further beyond the split-off
point.
Allocating
Limited Resources
5. A limitation of 3,000
machine-hours per week prevents Manhattan Manufacturing Company from meeting
the sales demands for its products. The
product information is as follows:
R1
R2
R3
R4
Unit selling price
$900
$600
$350
$600
Unit variable costs
– 600
– 250
– 200
– 300
Unit contribution margin
$300
$350
$150
$300
Machine-hours per unit
20
20
20
30
Assuming
unlimited demand for each product, determine what is the best short-run profit
maximizing strategy?
Ch 16
Assignment D Week 6Make or Buy
Decision1. Talk Company manufactures
10,000 telephones per year. The full
manufacturing costs per telephone are as follows:Direct materials$ 4Direct labor 16Variable manufacturing
overhead 10Average fixed
manufacturing overhead 11Total$41The Telecom America has
offered to sell Talk Company 10,000 telephones for $34 per unit. If Talk Company accepts the offer, $25,000 of
fixed overhead will be eliminated. Decide
whether or not Talk Company should make or buy the phones? Prove your case. Using
Limited Resources2. Northern
Production Company has 200 labor-hours available. There is no limit on machine-hours. Northern can sell all of Y it wants, but it
can only sell 45 units and 20 units of X and Z, respectively.Product XProduct YProduct ZContribution margin per
unit$30$20$24Labor-hours per unit 4 5 4Machine-hours per unit 10 8 2A
) What is the contribution margin per labor-hour for product Y?B)
To maximize profits, how many units of each product should Northern produce?Outsourcing
Decision3. The
Coil Company manufactures 10,000 rolls of cable each period. The cable is used as an input for producing
several other products that Coil manufactures.
The full manufacturing costs for a
batch of 100 rollsof cable are:Direct materials$170Direct labor 100Variable manufacturing
overhead
100Average fixed
manufacturing overhead
175Total$545The fixed manufacturing overhead is
comprised of depreciation expenses related to prior investments in facilities
and equipment that are used in the manufacturing of the cable. These assets have no other use than for the
manufacturing of the cable. An outside
supplier has offered to sell Coil the 10,000 rolls of cable necessary to meet
production needs this period for a lump-sum of $45,000. If Coil
accepts this outside suppliers offer, how much better or worse off will the
company be?Joint Costs4. The
Kirsten Company uses a joint process to produce products A, B, C, and D. Each product may be sold at its split-off
point or processed further. Joint
processing costs for a single batch of joint products are $65,000. Other relevant data are as follows:ProductSales ValueAt Split-OffAdditional Costsof ProcessingSales Valueof Final ProductA$15,000$18,000$ 45,000B27,00015,00040,000C20,00025,00030,000D 13,000
11,000 25,000$75,000$69,000$140,000Calculate
the effect on profits of processing Product A further beyond the split-off
point.Allocating
Limited Resources5. A limitation of 3,000
machine-hours per week prevents Manhattan Manufacturing Company from meeting
the sales demands for its products. The
product information is as follows:R1R2R3R4Unit selling price$900$600$350$600Unit variable costs- 600- 250- 200- 300Unit contribution margin$300$350$150$300Machine-hours per unit20202030Assuming
unlimited demand for each product, determine what is the best short-run profit
maximizing strategy?”
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