Managerial Acct- Answers - Sample Final Exam.docx

If purex company accepts this offer it will continue

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Company’s customers. If Purex Company accepts this offer, it will continue to produce and ship the remaining 55,000 units. Purex’s fixed manufacturing support costs will decrease to $90,000. Its fixed selling and distribution costs will remain unchanged. Variable selling and distribution costs will decrease to $0.80 per unit for the 25,000 units produced and shipped by Ajax Company. Determine the maximum amount per unit that Purex Company should pay Ajax Company for producing and shipping the 25,000 units.
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2. Alpha Corporation and Beta Corporation compete directly against each other, selling the same product of identical quality but employing different manufacturing processes and selling methods. The estimated costs and prices for the two firms follow: Alpha Beta Prices/Costs Corporation Corporation Sales price per unit $9.00 $8.00 Direct materials costs per unit $1.90 $2.25 Direct labor costs per unit $1.25 $2.40 Variable manufacturing support per unit $1.10 $1.15 Fixed manufacturing support costs $675,000 $450,000 Advertising and fixed selling costs $350,000 $400,000 Sales commission 4% of price 0 Sales units (number of) 350,000 400,000 Capacity units (number of) 500,000 400,000 REQUIRED (a) Determine the estimated breakeven points in annual sales units for the two firms. (b) Determine the annual sales volume at which the two firms have the same manufacturing costs. Explain the circumstances under which one of the two firms enjoys a competitive cost advantage. ; (c) How low can Alpha Corporation price its product and still break even, assuming that its sales volume stays at its existing level?
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(d) Recommend a competitive strategy for Alpha Corporation. Explain your answer by critically evaluating Alpha’s current strategy.
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  • Winter '14
  • Purex Company

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