170. Tullius Corporation has received a request for a special order of 8,000 units of product C64 for $50.00
each. The normal selling price of this product is $53.25 each, but the units would need to be modified slightly
for the customer. The normal unit product cost of product C64 is computed as follows:
Direct materials …………………………….
$18.10
Direct labor …………………………………..
7.40
Variable manufacturing overhead ……
5.20
Fixed manufacturing overhead ………..
4.80
Unit product cost …………………………..
$35.50
Direct labor is a variable cost. The special order would have no effect on the company’s total fixed
manufacturing overhead costs. The customer would like some modifications made to product C64 that would
increase the variable costs by $5.00 per unit and that would require a one-time investment of $43,000 in
special molds that would have no salvage value. This special order would have no effect on the company’s
other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company’s total net operating income of accepting the special order. Show your
work!
Incremental revenue (8,000 units × $50.00 per unit) ……………………
$400,000
Less incremental costs:
144,800
Direct labor (8,000 units × $7.40 per unit) ……………………………….
Variable manufacturing overhead (8,000 units × $5.20 per unit) ..
Modifications (8,000 units × $5.00 per unit) ……………………………..
Special molds ………………………………………………………………………
Total incremental cost ……………………………………………………………..
328,600
Incremental net operating income ……………………………………………..
$71,400
171. Albertine Co. manufactures and sells trophies for winners of athletic and other events. Its manufacturing
plant has the capacity to produce 16,000 trophies each month; current monthly production is 12,800 trophies.
The company normally charges $113 per trophy. Cost data for the current level of production are shown
below:
Variable costs:
Direct materials ………………..
$614,400
Direct labor ………………………
$256,000
Selling and administrative ….
$35,840
Fixed costs:
Manufacturing ………………….
$294,400
Selling and administrative ….
$94,720
The company has just received a special one-time order for 1,200 trophies at $61 each. For this particular
order, no variable selling and administrative costs would be incurred. This order would also have no effect on
fixed costs.
Required:
Should the company accept this special order? Why?
172. A customer has asked Goes Corporation to supply 6,000 units of product Y19, with some modifications,
for $31.30 each. The normal selling price of this product is $46.50 each. The normal unit product cost of
product Y19 is computed as follows:
Direct materials …………………………….
$16.40
Direct labor …………………………………..
8.30
Variable manufacturing overhead ……
4.40
Fixed manufacturing overhead ………..
1.90
Unit product cost …………………………..
$31.00
Direct labor is a variable cost. The special order would have no effect on the company’s total fixed
manufacturing overhead costs. The customer would like some modifications made to product Y19 that would
increase the variable costs by $8.90 per unit and that would require a one-time investment of $20,000 in
special molds that would have no salvage value. This special order would have no effect on the company’s
other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company’s total net operating income of accepting the special order. Show your
work!
Incremental revenue (6,000 units × $31.30 per unit) ……………………
$187,800
Less incremental costs:
98,400
49,800
26,400
53,400
20,000
Total incremental cost ……………………………………………………………..
Direct materials …………………………………………………………..
Direct labor …………………………………………………………………
Total …………………………………………………………………………..
Current monthly production …………………………………………..
Average direct materials and direct labor cost per unit ……..
173. Adamyan Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing
plant has the capacity to produce 15,000 medals each month; current monthly production is 12,750 medals.
The company normally charges $120 per medal. Cost data for the current level of production are shown
below:
Variable costs:
Direct materials ………………..
$624,750
Direct labor ………………………
$306,000
Selling and administrative ….
$15,300
Fixed costs:
Manufacturing ………………….
$506,175
Selling and administrative ….
$123,675
The company has just received a special one-time order for 700 medals at $83 each. For this particular order,
no variable selling and administrative costs would be incurred. This order would also have no effect on fixed
costs.
Required:
Should the company accept this special order? Why?
$624,750
306,000
$930,750
174. The constraint at Fulena Inc. is an expensive milling machine. The three products listed below use this
constrained resource.
WP
PG
LC
Selling price per unit ……………………..
$72.96
$175.45
$60.70
Incremental net operating income ……………………………………………..
($60,200)
Variable cost per unit …………………….
$56.40
$142.39
$47.20
Time on the constraint (minutes) …….
1.20
2.90
1.00
Required:
a. Rank the products in order of their current profitability from the most profitable to the least profitable. In
other words, rank the products in the order in which they should be emphasized. Show your work!
b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product.
Up to how much should the company be willing to pay to acquire more of the constrained resource?
175. Holt Company makes three products in a single facility. Data concerning these products follow:
Products
A
B
C
Selling price per unit …………………………..
$67.90
$57.7
0
$43.90
Direct materials …………………………..…….
$12.10
$10.3
0
$8.60
Direct labor ……………………………………….
$14.10
$8.00
$6.80
Variable manufacturing overhead ………..
$2.60
$2.20
$1.80
Variable selling cost per unit ……………….
$2.50
$2.20
$2.50
Mixing minutes per unit ………………………
2.70
3.30
4.70
Monthly demand in units …………………….
1,000
3,000
3,000
The mixing machines are potentially the constraint in the production facility. A total of 25,800 minutes are
available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for all three products?
b. How much of each product should be produced to maximize net operating income? (Round off to the
nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the
company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole
cent.)
PG
Selling price per unit ……………………………………………………….
$72.96
$175.45
$60.70
Variable cost per unit ……………………………………………………..
142.39
Contribution margin per unit …………………………………………….
$16.56
$33.06
$13.50
Time on the constraint (minutes) ……………………………………..
1.20
2.90
1.00
Contribution margin per unit of the constrained resource …….
$13.80
$11.40
$13.50
Ranking ………………………………………………………………………..
176. Wright, Inc. produces three products. Data concerning the selling prices and unit costs of the three
products appear below:
Product
C
D
E
Selling price …………………………………….
$9
0
$3
0
$6
0
Variable costs ………………………………….
$3
5
$1
0
$2
0
Fixed costs ……………………………………..
$4
5
$1
5
$3
0
Tapping machine time (minutes) ………..
5
4
2
Fixed costs are applied to the products on the basis of direct labor hours.
Demand for the three products exceeds the company’s productive capacity. The tapping machine is the
constraint, with only 2,400 minutes of tapping machine time available this week.
C
Mixing minutes per unit …………
3.30
4.70
Total minutes required …………..
9,900
C
Selling price per unit …………………………..
Direct materials …………………………..…….
10.30
8.60
Direct labor ……………………………………….
8.00
6.80
Variable manufacturing overhead ………..
2.20
1.80
Variable selling cost per unit ……………….
2.20
2.50
Total variable cost per unit ………………….
22.70
19.70
Contribution margin per unit ………………..
Mixing minutes per unit ………………………
3.30
4.70
Contribution margin per minute ……………
$5.15
Rank in terms of profitability ………………..
Optimal production …………………………….
3,000
2,809
Required:
a. Given the tapping machine constraint, which product should be emphasized? Support your answer with
appropriate calculations.
b. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a)
above, up to how much should the company be willing to pay for an additional hour of tapping machine time?
177. Falsetta Corporation makes three products that use the current constraint, which is a particular type of
machine. Data concerning those products appear below:
ZA
JK
DH
Selling price per unit ……………………..
$402.67
$462.82
$374.06
Variable cost per unit …………………….
$307.53
$344.56
$285.56
Time on the constraint (minutes) …….
6.70
7.30
5.90
Required:
a. Rank the products in order of their current profitability from the most profitable to the least profitable. In
other words, rank the products in the order in which they should be emphasized. Show your work!
b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product.
Up to how much should the company be willing to pay to acquire more of the constrained resource?
ZA
DH
Selling price per unit ……………………………………………………….
$402.67
$462.82
$374.06
Variable cost per unit ………………………………………………………
Contribution margin per unit …………………………………………….
$118.26
Time on the constraint (minutes) ………………………………………
6.70
7.30
5.90
Contribution margin per unit of the constrained resource …….
Selling price …………………………………….
Variable costs ………………………………….
Contribution margin ………………………….
Tapping machine time (minutes) ………..
5
Contribution margin per minute ………….
178. Glocker Company makes three products in a single facility. These products have the following unit
product costs:
Product
A
B
C
Direct materials …………………………..…….
$10.90
$15.8
0
$ 8.00
Direct labor ……………………………………….
12.50
12.60
9.90
Variable manufacturing overhead ………..
2.40
1.20
1.40
Fixed manufacturing overhead …………….
11.60
7.20
7.80
Unit product cost ……………………………….
$37.40
$36.8
0
$27.1
0
Additional data concerning these products are listed below.
Product
A
B
C
Mixing minutes per unit ………………
2.00
1.00
0.50
Selling price per unit …………………..
$55.80
$54.60
$43.10
Variable selling cost per unit ……….
$2.10
$1.40
$1.90
Monthly demand in units …………….
2,000
1,000
3,000
The mixing machines are potentially the constraint in the production facility. A total of 5,900 minutes are
available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for all three products?
b. How much of each product should be produced to maximize net operating income? (Round off to the
nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the
company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole
cent.)
B
C
Mixing minutes per unit …………
2.00
1.00
0.50
Monthly demand in units ……….
2,000
1,000
3,000
Total minutes required …………..
4,000
1,000
1,500
179. Bowen Corporation produces products P, Q, and R from a joint production process. Each product may
be sold at the split-off point or processed further. Joint production costs of $80,000 per year are allocated to
the products based on the relative number of units produced. Data for Bowen’s operations for last year follow:
Units
Produced
Sales Values
at Split-Off
Sales Values
If Processed
Further
Costs of
Processing
Further
Product P ….
3,000
$37,500
$50,000
$10,000
Product Q …
6,000
$46,500
$65,000
$30,000
Product R….
1,000
$15,500
$25,000
$5,000
Required:
Which products should be processed beyond the split-off point?
Sales value after further processing ……..
$50,000
Sales value at split-off ………………………..
Added sales value from processing ……..
Added processing costs ……………………..
Net gain (loss) from processing …………..
B
Direct materials …………………………..…….
10.90
Direct labor ……………………………………….
12.50
Variable manufacturing overhead ………..
1.20
Variable selling cost per unit ……………….
1.40
Total variable cost per unit ………………….
27.90
Contribution margin per unit ………………..
Mixing minutes per unit ………………………
1.00
Contribution margin per minute ……………
Rank in terms of profitability ………………..
Optimal production …………………………….
1,700
180. Iaci Company makes two products from a common input. Joint processing costs up to the split-off point
total $42,000 a year. The company allocates these costs to the joint products on the basis of their total sales
values at the split-off point. Each product may be sold at the split-off point or processed further. Data
concerning these products appear below:
Product X
Product Y
Total
Allocated joint processing costs …………..
$22,400
$19,600
$42,000
Sales value at split-off point ………………..
$32,000
$28,000
$60,000
Costs of further processing …………………
$11,600
$25,300
$36,900
Sales value after further processing ……..
$40,800
$54,200
$95,000
Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off
point?
d. What is the minimum amount the company should accept for Product Y if it is to be sold at the split-off
point?
Sales value after further processing ……..
Costs of further processing …………………
Benefit of further processing ……………….
Less: Sales value at split-off point ………..
Net advantage (disadvantage) …………….
Product X
Product Y
Minimum selling price at split-off ……………
181. Mitchener Corp. manufactures three products from a common input in a joint processing operation. Joint
processing costs up to the split-off point total $300,000 per year. The company allocates these costs to the
joint products on the basis of their total sales value at the split-off point.
Each product may be sold at the split-off point or processed further. The additional processing costs and
sales value after further processing for each product (on an annual basis) are:
Sales Value
at Split-Off
Further
Processing
Costs
Sales Value
After Further
Processing
Product M …….
$200,000
$85,000
$300,000
Product N……..
$155,000
$110,000
$285,000
Product P ……..
$325,000
$65,000
$370,000
Required:
Which product or products should be sold at the split-off point, and which product or products should be
processed further? Show computations.
182. Lafoe Corporation produces two intermediate products, A and B, from a common input. Intermediate
product A can be further processed into end product X. Intermediate product B can be further processed into
Product Y. The common input is purchased in batches that cost $40 each and the cost of processing a batch
to produce intermediate products A and B is $18. Intermediate product A can be sold as is for $28 or
processed further for $19 to make Product X that is sold for $50. Intermediate product B can be sold as is for
$30 or processed further for $21 to make product Y that is sold for $49.
Required:
a. Assuming that no other costs are involved in processing the common input or in selling products, what is
the profit (loss) from processing one batch of the common input into the products X and Y? Show your work!
b. Should each of the intermediate products, A and B, be sold as is or processed further? Explain.
Combined final sales value ($50 + $49) …………..
Less costs of producing the end products:
Cost of common input …………………………………..
Cost of processing common input …………………..
Cost of further processing product A ……………….
Cost of further processing product B ……………….
Profit (loss) ………………………………………………….
Product X
Product Y
Final sales value after further processing …………
Less sales value at split-off point …………………….
Incremental revenue from further processing ……
Profit (loss) from further processing …………………
Product P
Sales value after further processing ……..
Sales value at split-off ………………………..
Incremental revenue …………………………..
Further processing costs …………………….
Incremental income (loss) …………………..
$(20,000)
183. Benjamin Signal Company produces products R, J, and C from a joint production process. Each product
may be sold at the split-off point or be processed further. Joint production costs of $92,000 per year are
allocated to the products based on the relative number of units produced. Data for Benjamin’s operations for
the current year are as follows:
Units
Allocated Joint
Sales Value
Produced
Production Cost
at Split-off
Product R….
8,000
$32,000
$76,000
Product J ….
10,000
$40,000
$71,000
Product C….
5,000
$20,000
$48,000
Product R can be processed beyond the split-off point for an additional cost of $26,000 and can then be sold
for $105,000. Product J can be processed beyond the split-off point for an additional cost of $38,000 and can
then be sold for $117,000. Product C can be processed beyond the split-off point for an additional cost of
$12,000 and can then be sold for $57,000.
Required:
Which products should be processed beyond the split-off point?
Product R
Product C
Sales value after further processing ………….
$105,000
$117,000
Sales value at split-off …………………………….
48,000
Added sales value from processing ………….
Added processing costs ………………………….
12,000
Net gain (loss) from further processing ……..
$(3,000)
184. Bowdish Corporation purchases potatoes from farmers. The potatoes are then peeled, producing two
intermediate products-peels and depeeled spuds. The peels can then be processed further to make a cocktail
of organic nutrients. And the depeeled spuds can be processed further to make frozen french fries. A batch of
potatoes costs $37 to buy from farmers and $14 to peel in the company’s plant. The peels produced from a
batch can be sold as is for animal feed for $22 or processed further for $13 to make the cocktail of nutrients
that are sold for $40. The depeeled spuds can be sold as is for $37 or processed further for $21 to make
frozen french fries that are sold for $53.
Required:
a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money
does the company make from processing one batch of potatoes into the cocktail of organic nutrients and
frozen french fries? Show your work!
b. Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further
into an end product? Explain.