Week 1 Class Exercise

# Week 1 Class Exercise - a Total costs b Total variable...

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Week 1 In- Class Exercises 1. Strangle Company manufactures ties. When 28,000 items are produced, the costs per unit are: Direct materials \$0.60 Direct manufacturing labor 3.00 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 1.60 Variable selling 0.80 Fixed selling 1.13 Total \$8.30 The ties normally sell for \$22 each. Strangle Company has received a special order for 2,000 ties at \$10.00 per tie. Strangle Company has excess capacity. Required: Compute the amount by which the operating income would change if the order were accepted.

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2. Timmerman Company has budgeted sales of \$30,000 with the following budgeted costs: Direct materials \$6,300 Direct labor 4,100 Factory overhead: Variable 3,700 Fixed 5,600 Selling and administrative expenses: Variable 2,400 Fixed 3,200 Compute the average target markup for setting prices as a percentage of:
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Unformatted text preview: a. Total costs b. Total variable costs c. Variable manufacturing costs d. Total manufacturing costs 3. Bunny Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 11,000 units of this part are as follows: Direct materials \$25,000 Direct labor 34,000 Variable factory overhead 65,000 Fixed factory overhead 50,000 \$174,000 Of the fixed factory overhead costs, \$9,000 is avoidable. Required: a. Assuming there is no alternative use for the facilities, should Bunny Company take advantage of an offer from a supplier who is willing to sell Bunny Company 11,000 units of the same part for \$12.50 per unit? b. Would your answer to Part A change if the facilities could be rented for \$10,000 a year?...
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Week 1 Class Exercise - a Total costs b Total variable...

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