1.
Relevant Cost:
Relevant cost is the avoidable cost which incurred at the time of the decision making process of the management. It means that the cost related to the decision making process is called relevant cost.
Irrelevant Cost:
Irrelevant cost is that cost which is not affected of the decision making process of the management because this cost are those which already has been incurred
Variable Cost:
The Variable cost is that cost which varies with increase or decrease in the level of production. The Variable cost of per unit remains same. Here, it can be said that variable cost has the positive relationship with output of production.
Fixed Cost:
The Fixed cost is that cost which does not change with increase or decrease in the level of the production, but per unit fixed changes with change in the level production. Examples of the fixed cost are rent, wages and insurance.
To determine: Number of the unit produce of product A, B and C.
2.
Operating Income:
The outcome of deduction of operating expense and
Opportunity Cost:
Opportunity cost is total of potential income and other benefits that are lost due to rejection of alternatives. These costs are considered to evaluate the multiple project or options available.
To determine: The maximum amount that W is will to pay.
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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.arrow_forwardRundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 32 $ 16 24 19 10 20 22 16 12 19 14 $ 121 $ 92 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane normally produces and sells 44,000 Betas per year. What is the financial dvantage (disadvantage) of discontinuing the Beta product line?arrow_forward
- [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $240 and $162, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 131,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 35 Beta $ 15 48 23 27 25 35 38 32 28 35 30 $ 212 $ 159 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 8. Assume that Cane normally produces and sells 80,000 Betas and 100,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives…arrow_forwardA company produces three components on the same machine. The components are used i the manufacture of a finished product. The budget for next year indicates a requirement for 3,000 units of each component, but only 60,000 hours of machine time will be available. Additional components can be purchased from an external supplier to meet any production shortfall. Purchase price from external supplier $ per unit 65 78 12 80 What is the minimum total variable cost at which the 3,000 units of all three components can be obtained? Component Machine hours Variable production per unit cost per unit $ per unit 45 A B C O $537,000 $543,000 $549,000 $553,000 O O 9 5 70 56arrow_forward[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $155 and $115, respectively. Each product. uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 110,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $24 23 22 23 19 22 $ 133 Beta $ 12 26 12 25 15 17 $ 107 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 6. Assume that Cane normally produces and sells 97,000 Betas per year. What is the financial advantage (disadvantage) of discontinuing the Beta product line?arrow_forward
- [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 34 21 29 26 29 $ 179 Total contribution margin Beta $ 24 28 19 32 22 24 $ 149 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 14. Assume Cane's customers would buy a maximum of 94,000 units of Alpha and 74,000 units of Beta. Also assume the raw material available for production…arrow_forwardRequired information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Net operating income Alpha $42 42 26 34 31 34 $209 by The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.arrow_forwardplease answer in text form and in proper format answer with must explanation , calculation for each part and steps clearlyarrow_forward
- Required information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $165 and $130, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 113,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha $ 40 29 15 Pounds of raw materials per unit 25 21 24 $ 154 Alpha The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Beta 11. How many pounds of raw material are needed to make one unit of each of the two products? $ 24 25 14 27 17 19 $ 126 Betaarrow_forwardForest River produces 3 products, Aspen, Oak, and Pine. The company has accumulated the following information about each of its products: Sales price per unit Variable cost per unit Contribution margin per unit Multiple Choice O Aspen requires 4 machine hours, Oak requires 2.5 machine hours and Pine requires 1.5 machine hours. The company has 1,440 machine hours available each year. The demand for each product is 500 units. If Forest River schedules its production to maximize its total contribution margin, what would be the company's total contribution margin? $1,440.00. None of the answers is correct. $2,800.00. $2,083.20. Aspen $12.00 8.00 $ 4.00 $3,043.20. Oak $9.60 6.40 $3.20 Pine $8.00 5.60 $2.40arrow_forwardHarbevarrow_forward
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