chapter23probsetc - Problem Set C PROBLEM 23-1C Jason...

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PROBLEM 23-1C Jason Corporation manufactures hand-held, gasoline-powered leaf blowers. The sales revenue and costs of manufacturing one leaf blower are as follows: Revenue or cost element Per unit Sales revenue $79.00 Direct materials 22.00 Direct labor 24.00 Variable factory overhead 5.00 Variable selling expenses 3.50 Variable administrative expenses 2.50 Fixed factory overhead per unit 4.00 Fixed selling expenses per unit 5.00 The company has unused productive capacity. One of Jason’s better customers approaches Jason and offers to buy 20,000 leaf blowers at a cost of $55.00 each. Jason’s fixed factory overhead costs will increase by $2,000 if the special offer is accepted. Required: 1. Calculate the total variable cost of one leaf blower. This cost should include the per unit cost of the increased fixed factory overhead. 2. Compare your answer to Requirement 1 to the price offered to Jason by its customer. How much total extra income or loss will Jason earn or incur if the special offer is accepted. 3. Write a short, one-paragraph memo stating your recommendations to the Jason management concerning the customer’s offer. PROBLEM 23-2C Road Runner Corporation manufactures automobile air-conditioning systems. One of the major components of an automobile air-conditioning system is the air compressor. Road Runner manufactures all of the parts that go into the manufacture of the air compressor. Last year, 2005, Road Runner manufactured 100,000 air-conditioning systems. The systems are manufactured in a 90,000 square foot manufacturing facility in Wisconsin. The plant is solely used for manufacturing operations. There are no sales people assigned to the plant and there are no general and administrative functions accomplished at the factory that are not directly related to manufacturing. The total costs incurred in 2005 to run this plant are contained in the following table. 1
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This note was uploaded on 09/23/2010 for the course FIN 310 taught by Professor Smith during the Fall '10 term at Arizona Western College.

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chapter23probsetc - Problem Set C PROBLEM 23-1C Jason...

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