# Now assume that kava has no excess capacity and this

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Chapter 9 / Exercise 10
Managerial Accounting: The Cornerstone of Business Decision-Making
Hansen/Mowen
Expert Verified
21. Now assume that Kava has no excess capacity and this special order would require 10 minutes of the constraining resource, which could be used instead to produce products with a total contribution margin of \$11,000. What is the minimum price per unit on the special order below which the company should not go? A. \$60 B. \$81 C. \$100 D. \$22
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Chapter 9 / Exercise 10
Managerial Accounting: The Cornerstone of Business Decision-Making
Hansen/Mowen
Expert Verified
22. Curly Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 16,000 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows: Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 30% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 1 minutes on the machine that is the company's current constraint. If the component were bought, this machine time would be freed up for use on another product that requires 2 minutes on the constraining machine and that has a contribution margin of \$8.10 per unit. When deciding whether to make or buy the component, what cost of making the component should be compared to the price of buying the component?
Relevant cost per unit:
23. The operations of Gadwell Corporation are divided into the Blink Division and the Blur Division. Projections for the next year are as follows: If the Blur Division were dropped, Blink Division's sales would increase by 30%. If this happened, the operating income for Gadwell Corporation as a whole would be
The Clapton Company manufactures two products: Alpha and Beta. The costs and revenues are as follows: Total demand for Alpha is 10,000 units and for Beta is 6,000 units. Machine hours is a scarce resource. During the year, 50,000 machine hours are available. Alpha requires 4 machine hours per unit, while Beta requires 2.5 machine hours per unit.
24. How many units of Alpha and Beta should Clapton produce?
25. . What is the maximum contribution margin Clapton can achieve during a year? A. \$444,250 B. \$1,014,000 C. \$488,000 D. \$855,500 Alpha CM/hr: (75 - 40)/4 = \$8.75; Beta CM/hr: (44 - 21)/2.5 = 9.20: Produce Beta first: 6,000 units of Beta 2.5 hrs = 15,000 hours used: 50,000 - 15,000 = 35,000 hours remaining: Alpha: 35,000 hours available/4 = 8,750 units: CM = 8,750 \$35 + 6,000 \$23 = \$444,250
26. The following data (in thousands of dollars) have been taken from the accounting records of Karina Corporation for the just completed year. The Gross Margin for the year (in thousands of dollars) was: