the problem 7-02

q_pa7-1_and_others.xls

PA07-01

Student Name:
Class:
	Problem 07-01
MOHAVE CORP.
Requirement 1:
Incremental revenue
Incremental variable cost
Incremental profit
		0
Requirement 2:
Requirement 3:
Incremental revenue
Incremental variable cost
Incremental loss
		0
Requirement 4:
IF the company is running at full capacity the idifferent price will be its total cost of $13.

Given Data PA07-01:
	MOHAVE CORP.
	Special order units	1,500
	Special order unit sales price	$ 11.00
	Production information:
	Direct materials	$ 5.00
	Direct labor	2.00
	Variable manufacturing overhead	3.50
	Fixed manufacturing overhead	2.50
	Total cost	$ 13.00
	Regular sales price	$ 19.00
	Additional Information for Requirement 3:
	Special order units	2,000
	Special order unit sales price	$ 9.00

Student Name:
Class:
	Problem 07-02
MOHAVE CORP.
Requirement 1:
Relevant cost of making
Relevant cost of buying
Differential cost of making versus buying			Making
		0	Correct!
Requirement 2:
Requirement 3:
Relevant cost of making
Relevant cost of buying
Differential cost of making versus buying			Making
		0	Try again!
OR
Relevant cost of making
Relevant cost of buying
Differential cost of making versus buying			Making
		0	Try again!

Use the drop-down list to indicate whether the numbers favor Making or Buying the product.

Given Data PA07-02:
	MOHAVE CORP.
	Outsourced units	8,000
	Outsourced unit production cost	$ 6.00
	In-house production information:
	Direct materials	$ 3.00
	Direct labor	2.00
	Variable manufacturing overhead	1.00
	Fixed manufacturing overhead	2.00
	Total cost per unit	$ 8.00
	Annual profit generated by alternative
	use of space.	$ 10,000


Chapter 7, Problem Set A, Problem 4 - Analyzing Sell-or-Process
Further Decision
Given:		Rosa Umbrella	Decorated Umbrella
	Estimated Demand (Units)	10,000.00	10,000.00
	Estimated Sales Price	$ 8.00	$ 19.00
	Estimated cost per unit
	Direct materials	$ 2.50	$ 5.50
	Direct labor	1.50	4.00
	Variable mfg. overhead	0.50	2.50
	Fixed mfg. overhead	2.00	2.00
	Unit manufacturing cost	$ 6.50	$ 14.00
	Add'l development cost		$ 10,000.00
Required:
Req. 1		Sell	Process Further	Net Income Increase (Decrease)
	Incremental revenue	$ 80,000	$ 190,000.00	$ 110,000.00
	Incremental cost
	Net impact on profit
Req. 2	Yes the decorative should be added as it will create additional profit of $25000
Req. 3
Given:	Estimated Demand (Units)	8,000.00
		Sell	Process Further	Net Income Increase (Decrease)
	Incremental revenue	$ 80,000	$ 152,000.00	$ 72,000.00
	Incremental cost
	Net impact on profit
	Still the decorative may be added as it will generate excess profit of $15000, instead of $25000.