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Unformatted text preview: dogs per month x 12 months = $10 per dog of allocated
relevant fixed costs.
Explanation: it does not look like a good deal if it will be done for less than 12 months.
f) Puli had a talk with the manager of the local branch of “Pets ‘r’ groomed” who is
running out of capacity and need to outsource some of the dog grooming services (10
services per month) due to a boom in their non-dog business. Pets ‘r’ groomed manager
offered Puli the following deal:
Pets ‘r’ groomed will pay Puli $20 per dog groomed, but the dogs will be delivered and
picked up from Puli’s facilities.
Explain if this is a good deal for Puli. 
Variable cost (as determined in a) $10
Explanation: it does look like a good deal even if it is for a short period of time. Question 2 (20 marks – estimated time required: 30 minutes)
Tighthold Limited makes men’s belts and uses various suppliers for their raw material
purchasing needs. Each belt requires forty inches of rawhide, forty inches of liner, and
one brass belt buckle. The belts are adjustable and fit all waists up to 38 inches.
Tighthold Limited’s sales for the next few years are budgeted at 500,000 for 2009 and
540,000 belts for 2010 and 2011, respectively.
Currently, in inventory there are 50,000 belts, 50,000 yards of rawhide, 60,000 yards of
liner, and 40,000 belt buckles. There are 36 inches in a yard.
Rawhide costs $ 0.80 per yard, liner costs $ 0.20 per yard, and buckles cost $ 2.00 each.
Tighthold Limited’s new finished goods inventory policy is to have one-tenth of the
following year’s expected sales as ending inventory. This policy became effective and
was in place on December 31, 2008.
Raw materials existing inventory policy is that stock should be sufficient to produce 15 %
of the following year’s production.
1) Prepare annual production budgets for the upcoming 2009 and 2010 years. 
Annual Production Budgets Sales
Production requirements 2009
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- Spring '08