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8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss.

8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss. Solution: а. Expected orders= 1,200 units Plant A Plant B 1000X=900,000 800Y=800,000 X= 900 per unit Y= 1000 per unit Unit per month Variable Costs Total variable Cost Plant A Plant B Plant A Plant B 400 800 360,000 800,000 1,160,000 500 700 450, 000 700,000 1,150,000 600 600 540, 000 600,000 1,140,000 700 500 630,000 500, 000 1,130,000 800 400 720,000 400,000 1,120,000 900 300 810, 000 300,000 1,110,000 1000 200 900,000 200,000 1,100,000 Therefore Plant A should produce 1,000 units and 200 units for Plant B.
Transcribed Image Text:8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss. Solution: а. Expected orders= 1,200 units Plant A Plant B 1000X=900,000 800Y=800,000 X= 900 per unit Y= 1000 per unit Unit per month Variable Costs Total variable Cost Plant A Plant B Plant A Plant B 400 800 360,000 800,000 1,160,000 500 700 450, 000 700,000 1,150,000 600 600 540, 000 600,000 1,140,000 700 500 630,000 500, 000 1,130,000 800 400 720,000 400,000 1,120,000 900 300 810, 000 300,000 1,110,000 1000 200 900,000 200,000 1,100,000 Therefore Plant A should produce 1,000 units and 200 units for Plant B.
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