Group Assignment 3 Solutions

# Group Assignment 3 Solutions - 1 Chap 13 Gp Ex#3 Qs 10 pts...

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1 Chap 13 Gp Ex#3 Qs ( 10 pts) ANSWER KEY The following relates to Q 1 –2 Craves Company makes four products in a single facility. Data concerning these products appear below: Product A B C D Selling price per unit. ................................. \$28.2 0 \$26.6 0 \$20.4 0 \$24.7 0 Variable manufacturing cost per unit. ........ \$11.4 0 \$7.70 \$6.30 \$9.30 Variable selling cost per unit. .................... \$3.40 \$1.50 \$3.50 \$1.80 Milling machine minutes per unit. ............. 2.60 1.40 0.70 0.90 Monthly demand in units. .......................... 1,000 3,000 4,000 1,000 The milling machines are potentially the constraint in the production facility. A total of 10,400 minutes are available per month on these machines. 1 Which product makes the MOST profitable use of the milling machines? A) Product A B) Product B C) Product C D) Product D Answer: C ( highest CM/machine minute = \$ 15.14) 2 Up to how much premium should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round off to the nearest whole cent.) A) \$11.00 B) \$6.39 C) \$19.80 D) \$0.00 E) \$ 5.15 ( this is the CM/machine minute for product A which is the only product where demand can’t be satisfied by the available minutes. It is rankd last based on CM/minute, minutes were used to make C, D, B in those order and not enough was left to satisfy the demand for A) 3. . The Milham Company has two divisions - East and West. The divisions have the following revenues and expenses: East West Sales. ............................................................. \$720,00 0 \$350,000 Variable costs. .............................................. 370,000 240,000 Traceable fixed costs. ................................... 130,000 80,000 Allocated common corporate costs. .............. 120,00 50,000

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2 0 Net operating income (loss). ......................... \$100,00 0 \$ (20,000 ) Management at Milham is pondering the elimination of the West Division since it has shown an operating loss for the past several years. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall
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## This note was uploaded on 04/22/2008 for the course ACCT 2251 taught by Professor Lilysieux during the Winter '07 term at CSU East Bay.

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Group Assignment 3 Solutions - 1 Chap 13 Gp Ex#3 Qs 10 pts...

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