Chapter 6, Problem 1TF15

1.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The total amount of traceable fixed manufacturing overhead for product line A and product line B.

2.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The total amount of the company’s common fixed expenses.

3.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage of the offer if company C expects to produce and sell 80,000 A during the current year and a new customer is willing to buy 10,000 additional A for a price of $80/unit.

4.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial disadvantage if company C accepts the offer to produce and sell 90,000 B during the current year and a new customer is willing to buy 5,000 additional B for a price of $39/ unit.

5.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage or disadvantage if company C accepts the offer to produce and sell 95,000 A during the current year and a new customer is willing to buy 10,000 additional B for a price of $80/ unit and this offer will decrease A’s sales to regular customers by 5,000 units.

6.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage (disadvantage) of discontinuing B product line if company C normally produces and sells 90,000 B per year.

7.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage (disadvantage) of discontinuing B product line if company C produces and sells 40,000 B per year.

8.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage (disadvantage) of discontinuing B product line if company C increases sales of A by 15,000 units and it normally sells and produces 60,000 B per year and 80,000 A per year.

9.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage (disadvantage) of buying 80,000 units from the supplier instead of manufacturing those units if company C produces and sells 80,000 A during the current year and a supplier offered to manufacture and deliver 80,000 A to Company C for a price of $80/unit.

10.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The financial advantage (disadvantage) of buying 50,000 units from the supplier instead of manufacturing those units if company C produces and sells 50,000 A during the current year and a supplier offered to manufacture and deliver 80,000 A to Company C for a price of $80/unit.

11.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The pounds of material which are needed to manufacture one unit of each of the two products A and B.

12.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The contribution margin per pound of raw material is earned by each of the two products A and B.

13.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

Requirement 13

The units of each product that company C should produce to maximize its profits if the company's raw material available for production is limited to 160,000 pounds and customers would buy a maximum of 80,000 units of A and 60,000 units of B.

14.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The maximum contribution margin that Company C can earn in the limited quantity of raw materials units of each product if the company's raw material available for production is limited to 160,000 pounds and customers would buy a maximum of 80,000 units of A and 60,000 units of B.

15.

To determine

Case summary: Company C manufactures two products: A and B which require only one type of raw material that costs around $6 per pound and the company sells products A and B for $120 and $80 respectively. The company is capable to produce 100,000 units of each product and it considers that its traceable fixed manufacturing costs can be avoidable however, its common fixed expenses are unavoidable.

The amount which company C should be willing to pay per pound for additional raw materials if the company uses its 160,000 pounds of raw materials, the company's raw material available for production is limited to 160,000 pounds and customers would buy a maximum of 80,000 units of A and 60,000 units of B.