4-101
4-103
108.
Macro Electronics manufactures low-cost, consumer-grade computers. It sells these
computers to various electronics retailers to market under store brand names. It
manufactures two computers, the Lightning 2.0 and the Lightning 2.4, which differ in
terms of speed, memory, and hard drive capacity. The following information is available:
Lightning
2.0
Lightning
2.4
Direct materials
$90
$110
Direct labor
60
90
Variable overhead
30
30
Fixed overhead
180
240
Total cost per unit
$360
$470
Selling price
600
780
Units produced and
sold
6,000
3,000
The average wage rate is $30 per hour. The plant has a capacity of 32,000 direct labor–
hours.
Required:
1. A nationwide discount chain has approached Macro with an offer to buy 2,000
Lightning 2.0 computers and 2,000 Lightning 2.4 computers if the unit prices are lowered
to $350 and $450, respectively.
a. If Macro accepts the offer, how many direct labor-hours will be required to produce the
additional computers?
b. How much will the profit increase (or decrease) if Macro accepts this proposal? All
other prices will remain the same.
2. Suppose that the customer has offered instead to buy
up
to
3,000 each of the two
models at $350 and $450, respectively.
a. How many of each product should be manufactured and sold? Assume current demand
4-105
109.
The operations of Balance Corporation are divided into the Kaplan Division and the Norton
Division. Projections for the next year are as follows:
Kaplan
Division
Norton
Division
Total
Sales
$1,200,000
$600,000
$1,800,000
Variable costs
480,000
360,000
840,000
Contribution
margin
$720,000
$240,000
$960,000
Direct fixed
costs
160,000
90,000
250,000
Segment
margin
$560,000
$150,000
$710,000
Allocated
common costs
360,000
180,000
540,000
Operating
income (loss)
$200,000
($30,000)
$170,000
110.
The Fortune Company produces 15,000 units of Part QT34 annually at a total cost of
$600,000.
4-106
Direct materials
$60,000
Direct labor
165,000
Manufacturing overhead
375,000
Total
$600,000
111.
The Fair Play Division of Fast Company produces wheels for off-road sport vehicles. One-
half of Fair Play’s output is sold to the Glow Division of Fast; the remainder is sold to
outside customers. Fair Play’s estimated operating profit for the year is:
Internal
Outside
Sales
$300,000
$400,000
Variable costs
200,000
200,000
Fixed costs
60,000
60,000
Operating profits
$40,000
$140,000
Unit sales
20,000
20,000
112.
Halfway Industries produces two products. Information about the products is as follows:
Clocks
Headphones
Units produced and sold
8,000
20,000
Selling price per unit
$16
$14
Variable costs per unit
10
9
113.
4-110
114.
Dickson Industries has two divisions: the North Division and the South Division.
Information relating to the divisions for the year just ended is as follows:
North
South
Units produced and sold
40,000
50,000
Selling price per unit
$9
$16
Variable costs per unit
4
6
Direct fixed cost
148,000
220,000
Common fixed cost
140,000
140,000
Common fixed expenses have been allocated equally to each of the two divisions.
Required:
Prepare a segmented income statement for Dickson.
Sales revenue
Variable costs
Direct fixed costs
Segment margin
Operating profit
115.
The operations of Jorge Corporation are divided into the Northern Division and the Eastern
Division. Projections for the next year are as follows:
Northern
Division
Eastern
Division
Total
Sales
$750,000
$540,000
$1,290,000
Less: Variable
costs
270,000
300,000
570,000
Contribution
margin
$480,000
$240,000
$720,000
Less: Direct
fixed costs
225,000
190,000
415,000
Segment margin
$255,000
$50,000
$305,000
Less: Allocated
common costs
130,000
95,000
225,000
Operating
income (loss)
$125,000
($45,000)
$80,000
116.
The Ramos Company manufactures two products: Treadmills and Elliptical Trainers. The
costs and revenues are as follows:
Treadmill
Elliptical
Trainer
Sales price per unit
$300
$175
Variable cost per
unit
160
85
117.
Short Inc has 5,200 machine hours available each month. The following information on the
company’s three products is available:
Product
1
Product
2
Product
3
Contribution
margin per unit
$45.00
$54.00
$22.50
Machine hours per
unit
3
2
1
Sales demand in
units
900
1,000
3,000
118.
Rainier Inc has 6,400 machine hours available each month. The following information on
the company’s three products is available:
Product
X
Product
Y
Product
Z
Contribution
margin per unit
$20.00
$21.00
$17.50
Machine hours per
unit
2
3
2
Sales demand in
units
1,000
1,500
1,500
119.
The Valor Company manufactures two products: L and M. The costs and revenues are as
follows:
Product L
Product M
Sales price
$150
$112
Variable cost per unit
90
68
Machine hours per unit
15
10
120.
Giant Inc has 3,600 machine hours available each month. The following information on the
company’s three surgical kits is available:
Surgical
Kit 1
Surgical
Kit 2
Surgical
Kit 3
Contribution margin
per unit
$5.00
$4.00
$2.50
Machine hours per
unit
2
1
3
Sales demand in
units
1,000
800
900
121.
Moxy Inc has 9,600 machine hours available each month. The following information on the
company’s three products is available:
Product
X
Product
Y
Product
Z
Contribution
margin per unit
$20.00
$21.00
$17.50
Machine hours per
unit
8
12
6
Sales demand in
units
500
750
1,000
122.
Frank Industries manufactures 200,000 components per year. The manufacturing cost of
the components was determined as follows:
Direct materials
$200,000
Direct labor
320,000
Variable manufacturing overhead
120,000
Fixed manufacturing overhead
160,000
4-119
123.
Talent Industries manufactures 30,000 components per year. The manufacturing cost of
the components was determined to be as follows:
Direct materials
$300,000
Direct labor
480,000
Variable manufacturing overhead
180,000
Fixed manufacturing overhead
240,000
Total
$1,200,000
124.
The Sands Company manufactures and sells several products, one of which is called a slip
differential. The company normally sells 30,000 units of the slip differential each month. At
this activity level, unit costs are:
Direct materials
$4
4-120
Direct labor
$3
Variable manufacturing overhead
$4
Fixed manufacturing overhead
$5
Variable selling
$3
Fixed selling
$1