marginal
knohe_
module-06_problems.xlsxOutsourcing
| Cans Inc. is considering purchasing component YY instead if producing it in-house. Component YY can be purchased for $207. | |||
| The following cost information pertains to the production of component YY. Cans Inc. uses 75,000 compenents per year. | |||
| Direct Materials | $100.80 | ||
| Direct Labor (10 minutes per part) | |||
| ($18 per hour) | $3 | ||
| Variable OH | $4.60 | ||
| Fixed OH | $234,000 | ||
| Depreciation | $32,420 | ||
| Prepare an incremental analysis to determine if component YY should continue to be produced in-house or purchased from an outside vendor. | |||
| What are some qualitative considerations Cans Inc. should make? | |||
Special Order
| Sports R Us produces basketballs. Recently the local in-house team contacted them about purchasing 2,000 basketballs and has agreed to pay $18 per ball | |
| plus $3 per ball for shipping. The current year's production is 22,000 basketballs and total capacity is 25,000 balls. The following costs pertain to the | |
| production of basketballs. | |
| Direct Materials | $9.20 |
| Direct Labor | $4.00 |
| VOH | $3.80 |
| FOH | $4 |
| Cost per ball | $20.64 |
| Prepare an incremental analysis. Should Sports R Us accept the special Order? Why? | |
Segment Profitability
| The following information pertains to Utility Products Inc.: | |||
| Brooms | Mops | Total | |
| Sales | $ 600,000 | $ 400,000 | $ 1,000,000 |
| Variable Costs | 420,000 | 180,000 | 600,000 |
| Contribution Margin | $ 180,000 | $ 220,000 | $ 400,000 |
| Less Direct fixed costs | 50,000 | 150,000 | 200,000 |
| Segment margin | $ 130,000 | $ 70,000 | $ 200,000 |
| allocated Common Costs | 40,000 | 80,000 | 120,000 |
| Net Income | $ 90,000 | $ (10,000) | $ 80,000 |
| Since the Mops division is operating at a loss should it be dropped? Why? | |||
| If the Mops division is dropped what will happen to the profits of Utility Products? Support your answer with computations. |
Sell or process furter
| Pork Processors Co. is considering offering three new pork products. The relevant cost data for the products follows: | |||
| Product | Sales Revenue if sold at split-off | Sales Revenue if Processed Further | Further Processing costs |
| Chops | $ 100,000 | $ 200,000 | $ 80,000 |
| Head | 20000 | 40000 | 25000 |
| Belly | 50000 | 60000 | 5000 |
| The chops can be brined and smoked and sold as breakfast steaks. The belly can be smoked and sold as bacon and the head can be boiled and sold as | |||
| head cheese. Which of these products should be processed further and which should be sold at the split-off point. Support your decisions with calculations. | |||
Constrained Resource
| Zeke Co. manufactures two products that both require labor and machining.There is unlimited demand for these products. | ||
| Unit sales and cost data and processing requirements follow: | ||
| Product A | Product B | |
| Selling Price | $75 | $200 |
| Variable costs | $25 | $80 |
| Machine hours required | 0.4 | 1.2 |
| Labor hours required | 2 | 6 |
| The company is limited to 160,000 machine hours and 120,000 labor hours. Fixed costs are $1,000,000 | ||
| What is the most profitable mix of products to produce? Explain your answer | ||
