Managerial Acct- Answers - Sample Final Exam.docx

The only selling costs that would be associated with

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The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. What is the minimum price per unit Barker should charge for this special order? c. An outside manufacturer has offered to produce 80,000 Zets for Barker Company and to ship them directly to Barker’s customers. If Barker Company accepts this offer, the facilities that it uses to produce Zets would be idle; however, fixed manufacturing and selling costs would continue at 30% of their present level. The outside manufacturer says he will incur all selling costs and will charge Barker Company $31 per Zet. Should Zets be produced by Barker Company or an outside manufacturer? What other factors will you consider? 6. Purex Company produces and sells a single product called Kleen. Annual production capacity is 100,000 machine hours. It takes one machine hour to produce a unit of Kleen. Annual demand for Kleen is expected to remain at 80,000 units. The selling price is expected to remain at $10 per unit. Cost data for producing and selling Kleen are as follows: Variable costs per unit: Direct materials $1.50 Direct labor 2.50 Variable manufacturing support 0.80 Variable selling and distribution 2.00 Fixed costs per year:
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Fixed manufacturing support $100,000.00 Fixed selling and distribution 50,000.00 REQUIRED (consider each part separately). a. Purex Company has an inventory of 2,000 units of Kleen that are partially damaged in storage. It can sell these units through regular channels at reduced prices. These 2000 units will be valueless unless sold this way. Sale of these units will not affect regular sales of Kleen. Compute the relevant unit cost for determining the minimum selling price for these units. b. Purex Company can use its current facilities to manufacture a product called Shine, which takes 2.5 machine hours per unit to produce. The marketing department estimates that 50,000 units of Shine can be sold each year at $16 per unit. Sale of Shine will not affect the demand for Kleen. Cost data for producing and selling Shine are as follows: Variable costs per unit: Direct materials $2.50 Direct labor 4.00 Variable manufacturing support 1.20 Variable selling and distribution 3.30 Determine the product mix that will maximize Purex Company’s profit.
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c. Ajax Company has offered to make and ship 25,000 units of Kleen directly to Purex Company’s customers.
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