Coronado Industries produces face cream. Each bottle of face cream costs $11 to produce and can be sold for $15. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $16 each. Coron
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Coronado Industries produces face cream. Each bottle of face cream costs $11 to produce and can be sold for $15. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $16 each. Coronado Industries could sell the sunscreen bottles for $21 each.
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- Bunyon Lumber Company incurs a cost of $490 per hundred board feet in processing certain "rough cut" lumber, which it sells for $635 per hundred board feet. An alternative is to produce a "finished cut" at a total processing cost of $565 per hundred board feet, which can be sold for $480 per hundred board feet. What is the amount of (a) the differential revenue, (b) differential cost, and (c) differential income for processing rough-cut lumber into finished cut?Vernon Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Vernon produces and sells only 6,900 bikes each year. Due to the low volume of activity, Vernon is unable to obtain the economies of scale that larger producers achieve. For example, Vernon could buy the handlebars for $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs $103,500 82,800 13,800 48,300 Materials $15 Labor 12 Overhead Allocated facility-level costs 2 Total $36 $248,400 After seeing these figures, Vernon's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion?Concord, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $13, while the cost of assembling each unit is estimated at $15. Unassembled units can be sold for $54, while assembled units could be sold for $60 per unit. What decision should Concord make? O Sell before assembly; the company will save $9 per unit. Process further; the company will save $9 per unit. O Process further; the company will save $6 per unit. O Sell before assembly; the company will save $4 per unit.
- Dairyplus processes organic milk into plain yogurt. Dairyplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $890, yields 570 gallons of plain yogurt. The company sells the one-gallon tubs for $8.00 each and spends $0.14 for each plastic tub. Dairyplus has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairyplus could further process each batch of plain yogurt into 12,160 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairyplus would sell each individual portion for $0.46. Packaging would cost $0.07 per portion, and fruit would cost $0.12 per portion. Fixed costs would not change. Should Dairyplus continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt into…Adams Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Adams produces and sells only 6,200 bikes each year. Due to the low volume of activity, Adams is unable to obtain the economies of scale that larger producers achieve. For example, Adams could buy the handlebars for $30 each; they cost $33 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total Unit Cost $15 9 2 7 $33 Total $ 93,000 55,800 12,400 43,400 $204,600 After seeing these figures, Adams's president remarked that it would be foolish for the company to continue to produce the handlebars at $33 each when it can buy them for $30 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Answer is complete but not entirely correct. Per Unit TotalA dairy farmer has found that it costs $1.84 to produce each gallon of milk, and the daily fixed cost to maintain production is $345. If the farmer charges $3.29 per gallon of milk when he sells it to a large grocery store chain, how many gallons of milk does the farmer need to produce and sell to make a daily profit of $479? (Round your answer to the nearest whole number of gallons.) The farmer needs to produce and sell gallons of milk to make a daily profit of $479.
- Sweet Acacia Inc. makes unfinished bookcases that it sells for $58. Production costs are $38 variable and $9 fixed. Because it has unused capacity, Sweet Acacia is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $7 per unit with no increase in fixed costs. Prepare an analysis on a per-unit basis that shows whether Sweet Acacia should sell unfinished or finished bookcases. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Sales per unit Variable cost per unit Fixed cost per unit Total per unit cost Net income per unit The bookcases 69 $ Sell ✓processed further. LA GA Process Further $ $ Net Income Increase (Decrease)Walton Co. purchases the 400,000 compressors that it installs in its refrigerators from a Chinese company for the price of $26 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier.. However, the company's mechanical engineer is opposed to making the compressors because the production cost per unit is $28 as shown below: Per unit Total Direct material 9.00 Direct labor 7.00 Supervisor's salary 4.50 $18,00,000 Depreciation on machinery 2.50 Rent 1.00 400,000 Variable manufacturing overhead 4.00 $16,00,000 Total production cost 28.00 If Walton Co. decides to make the compressors, a supervisor would have to be hired (at a salary of $18, 00,000) to oversee production. However, the company does not need to purchase any new equipment. The rent charge above is based on space utilized in the plant. The total rent on the factory is $24,00,000 per period. Required: What is the…Futura Company purchases the 60,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $11.20 as shown below: Per Unit Total Direct materials $ 5.00 Direct labor 2.50 Supervision 1.70 $ 102,000 Depreciation 1.10 $ 66,000 Variable manufacturing overhead 0.40 Rent 0.50 $ 30,000 Total product cost $ 11.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $102,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the…
- McBurger, Inc., wants to redesign its kitchens to improve productivity and quality. Three designs, called designs K1, K2, and K3, are under consideration. No matter which design is used, daily production of sandwiches at a typical McBurger restaurant is for 500 sandwiches. A sandwich costs $1.50 to produce. Non-defective sandwiches sell, on the average, for $2.50 per sandwich. Defective sandwiches cannot be sold and are scrapped.The goal is to choose a design that maximizes the expected profit at a typical restaurant over a 300-day period. Designs K1, K2, and K3 cost $130,000 $150,000, and $170,000, respectively. Under design K1, there is a .80 chance that 90 out of each 100 sandwiches are non-defective and a .20 chance that 70 out of each 100 sandwiches are non-defective. Under design K2, there is a .85 chance that 90 out of each 100 sandwiches are non-defective and a .15 chance that 75 out of each 100 sandwiches are non-defective. Under design K3, there is a .90…Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs. Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…Dairyplus processes organic milk into plain yogurt. Dairyplus sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $890, yields 540 gallons of plain yogurt. The company sells the one-gallon tubs for $7.00 each and spends $0.16 for each plastic tub. Dairyplus has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairyplus could further process each batch of plain yogurt into 11,520 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairyplus would sell each individual portion for $0.40. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairyplus continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt…
