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SolutionstoHW3

# SolutionstoHW3 - Homework Problems 4-35 4-36 4-37 4-42 4-50...

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4-42. (30 min.) Special Orders: Sherene Nili Based on profit, Ms. Nili should accept the special order. Accepting the special order means Ms. Nili will only be able to produce 10 standard dresses. Each standard dress requires 15 (= 300 hours ÷ 20 dresses) hours of machine time per dress. Because she is committed to the custom dresses (whether more profitable or not), she must cut back the number of standard dress by 10. The rent, heat and light, and other production costs are fixed and will not be affected by this decision. Without Special Order With Special Order Impact Revenue a \$ 75,000 \$ 87,500 \$ 12,500 increase Materials b 18,000 20,000 2,000 increase Labor c 29,000 34,500 5,500 increase Machine depreciation d 900 890 10 decrease Contribution margin \$ 27,100 \$ 32,110 \$ 5,010 increase* Rent 7.000 7.000 0 Heat and light 1,600 1,600 0 Other production costs 2,800 2,800 0 Marketing & admin. 7,700 7,700 0 Operating profit \$ 8,000 \$ 13,010 \$ 5,010 increase* * Note the equality. a Additional revenues with the special order = \$25,000 [10 standard dresses x (\$25,000 ÷ 20 dresses)]. b Additional materials with the special order = \$6,000 [10 standard dresses x (\$8,000 ÷ 20 dresses)]. c Additional labor with the special order = \$10,000 [10 standard dresses x (\$9,000 ÷ 20 dresses)]. d Reduced machine depreciation with the special order = \$140 \$150. (Note the machine depreciation rate is \$1 per hour.) Alternative solution using differential analysis: Additional revenue ........................... \$12,500 =\$25,000 10 x (\$25,000 ÷ 20) Additional materials ......................... 2,000 = \$6,000 10 x (\$8,000 ÷ 20) Additional labor ................................ 5,500 = \$10,000 10 x (\$9,000 ÷ 20) Reduced machine depreciation ........ (10) = \$140 \$150 Additional contribution margin… ...... \$..5,010
4-50. (60 min.) Determining Optimum Product Mix: Austin Enterprises. a. Basic Classic Formal Total revenue a ............................................. \$600,000 \$640,000 \$5,700,000 Less variable manufacturing costs: Direct materials b ..................... 200,000 60,000 360,000 Direct labor c ............................ 224,000 320,000 3,360,000 Variable overhead d ................... 56,000 80,000 840,000 Variable marketing e .................. 60,000 64,000 570,000 Total costs ........................... 540,000 524,000 5,130,000 Contribution margin ................... \$ 60,000 \$116,000 \$570,000 Total contribution margin f .................................. \$746,000 Total fixed costs g ............................................... 74,000 Total operating profit .......................................... \$672,000 a Revenue: Basic \$ 600,000 = \$30 x 20,000 units Classic \$ 640,000 = \$64 x 10,000 units Formal \$5,700,000 = \$190 x 30,000 units b Direct materials: Basic \$200,000 = \$20 x .5 yards x 20,000 units Classic \$ 60,000 = \$20 x .3 yards x 10,000 units Formal \$360,000 = \$20 x .6 yards x 30,000 units

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SolutionstoHW3 - Homework Problems 4-35 4-36 4-37 4-42 4-50...

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