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125.
Carlson Company makes 4,000 units per year of a part called an axial tap for use in one of
its products. Data concerning the unit production costs of the axial tap follow:
Direct materials
$35
Direct labor
10
Variable manufacturing overhead
8
Fixed manufacturing overhead
20
Total manufacturing cost per unit
$73
Purchase cost
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126.
Part XE3 is used in one of Sun Corporation’s products. The company’s Accounting
Department reports the following costs of producing the 12,000 units of the part that are
needed every year.
Per Unit
Direct materials
$4.50
Direct labor
$1.20
Variable overhead
$2.70
Supervisor’s salary
$3.00
Depreciation of special equipment
$2.30
Allocated general overhead
$1.80
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127.
Snagless Corporation has received a request for a special order of 9,000 units of product
ZX9 for $46.50 each. The normal selling price of this product is $51.60 each, but the units
would need to be modified slightly for the customer. The normal unit product cost of
product ZX9 is computed as follows:
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Direct materials
$17.30
Direct labor
6.60
Variable manufacturing overhead
3.80
Fixed manufacturing overhead
6.70
Unit product cost
$34.40
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 ZX9 that would increase the variable costs by $6.20 per unit and that
would require a one-time investment of $46,000 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 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!
Less incremental costs:
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Total incremental cost
Incremental net operating income
128.
A customer has asked Balkans Corporation to supply 5,000 units of product DX9, with
some modifications, for $40.20 each. The normal selling price of this product is $52.80
each. The normal unit product cost of product DX9 is computed as follows:
Direct materials
$12.70
Direct labor
6.10
Variable manufacturing overhead
8.70
Fixed manufacturing overhead
7.70
Unit product cost
$35.20
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 DX9 that would increase the variable costs by $3.50 per unit and that
would require a one-time investment of $23,000 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 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!
Less incremental costs:
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129.
Florence Corporation makes three products that use the current constraint, which is a
particular type of machine. Data concerning those products appear below:
X1
R2
Z3
Selling price per unit
$325.89
$543.15
$508.00
Variable cost per unit
$251.94
$420.75
$397.60
Time on the constraint
(minutes)
5.10
8.50
8.00
Selling price
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130.
Atuso, Inc. produces three products. Data concerning the selling prices and unit costs of
the three products appear below:
Product
J1
K2
L3
Selling price
$80
$60
$90
Variable costs
$50
$40
$55
Fixed costs
$25
$8
$22
Grinding machine time (minutes)
10
5
7
Selling price
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131.
Varix Company makes three products in a single facility. These products have the
following unit product costs:
Product
A
B
C
Direct materials
$12.80
$9.30
$4.70
Direct labor
14.10
14.90
10.00
Variable manufacturing
overhead
1.20
0.90
0.50
Fixed manufacturing
overhead
18.50
17.20
23.70
Unit product cost
$46.60
$42.30
$38.90
Additional data concerning these products are listed below.
Product
A
B
C
Mixing minutes per unit
3.70
3.40
3.90
Selling price per unit
$59.20
$60.10
$55.30
Variable selling cost per
unit
$2.90
$2.70
$3.70
Monthly demand in units
2,000
4,000
2,000
The mixing machines are potentially the constraint in the production facility. A total of
24,200 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
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4-136
132.
Mobley Company makes three products in a single facility. Data concerning these
products follow:
Products
A
B
C
Selling price per unit
$70.00
$92.40
$85.90
Direct materials
$34.00
$50.50
$56.90
Direct labor
$21.40
$24.00
$14.80
Variable manufacturing
overhead
$1.20
$0.60
$0.50
Variable selling cost per
unit
$1.80
$2.30
$2.10
Mixing minutes per unit
1.20
0.80
0.40
Monthly demand in units
2,000
4,000
2,000
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133.
The constraint at Trump Inc. is an expensive milling machine. The three products listed
below use this constrained resource.
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9P
8L
7N
Selling price per unit
$404.58
$478.74
$358.44
Variable cost per unit
$308.88
$371.30
$285.36
Time on the constraint
(minutes)
6.60
7.90
5.80
per unit
constraint
(minutes)
134.
135.