Lakeside Incorporated produces a product that currently sells for $62 per unit. Current production costs per unit include direct materials, $16.5; direct labor, $18.5; variable overhead, $11.5; and fixed overhead, $11.5. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product for $68 per unit? Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Loss amounts should be indicated with a minus sign. b. Should it be processed further? a. Incremental Profit (Loss) b. Should it be processed further?

Lakeside Incorporated produces a product that currently sells for $62 per unit. Current production costs per unit include direct materials, $16.5; direct labor, $18.5; variable overhead, $11.5; and fixed overhead, $11.5. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product for $68 per unit? Note: Do not round your intermediate calculations. Round your final answer to 2 decimal places. Loss amounts should be indicated with a minus sign. b. Should it be processed further? a. Incremental Profit (Loss) b. Should it be processed further?

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter11: Linear Optimization Models

Section: Chapter Questions

Problem 10P: The management of Hartman Company is trying to determine the amount of each of two products to...

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The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?
Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit $3,200,000 Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: $2,028,500 Capital-Intensive Labor-Intensive
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Use the following information for the next 2 questions (8 & 9). Division X produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 8. If X is operating at capacity and has unlimited external customer demand, what should be the minimum transfer price? 9. If X has sufficient excess capacity to meet internal demand, what should be the minimum transfer price?
Mozaic Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system (CAM) or a labor-intensive production system (LIP). The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: CAM System LIP System Direct Material $5.00 $5.60 Direct Labor (DLH) 0.5 DLH x $12 $6.00 0.8 DLH x $9 $7.20 Variable Overhead 0.5 DLH x $6 $3.00 0.8 DLH x $6 $4.80 Fixed Overhead* $2,440,000 $1,320,000 * These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company's marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: 1. Calculate the estimated break-even point in annual unit sales of the new product if the company uses the (a) computer-assisted…
Pharoah Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Pharoah' market research department has recommended an introductory unit sales price of $28.00. The selling expenses are estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. 2. Labor-Intensive $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Break-even point in units Capital-Intensive Labor-Intensive
Crane Company has decided to introduce a new product that can be manufactured by either a capital-intensive method or a labour-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs under the two methods are as follows: Direct materials Direct labour Variable overhead Fixed manufacturing costs Capital-Intensive $10.00 per unit $12.00 per unit $6.00 per unit $2,624,960 Labour-Intensive $11.00 per unit $16.00 per unit $9.00 per unit $1,612,000 Crane's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are estimated to be $522,080 annually, plus $4 for each unit sold, regardless of the manufacturing method.
Answer all parts of the question 1. The unit costs ($) for manufacturing a component for a washing machine are as follows: Direct labor: 20; direct materials: $5; indirect labor and materials: 20% of direct labor; fixed and administrative costs: 30; selling costs: 10. a) Assuming a 90% first-pass yield, what should the unit selling price be if the manufacturer desires a 20% profit margin for conforming product? b) The manufacturer has identified a secondary market for the nonconforming products, that they can sell at $75/unit. Conforming product they wish to sell at 30% above costs. What is the expected profit per unit sold if the company has the same first-pass yield as in part a)? c) If the company improves its first-pass yield to 98%, what is the expected profit per unit sold, assuming other conditions are as stated in part b)?
The composting division has identified a source of additional compostable waste at a price of $205 per ton. What would be the impact on the company as a whole if the 400 tons of material is purchased from the outside supplier? As a decentralized unit, what decision would the composting division make regarding the additional material?
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10. Product engineering has determined that a certain portion of the product conversion could be outsourced. Direct labor and variable overhead would be reduced by 50 percent. Raw material would not be affected and no other alternative use for any idle production capacity is apparent. The outsourcing supplier would charge ABC $15 to provide this product conversion. Identify the following relevant costs to process further: What is: Avoidable cost if outsourced = $ per unit Cost to buy = $ per unit Difference in conversion cost = $ per unit Decision to make or buy = (Make/Buy)
The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows. CAM System: Direct Material = $5.0 Direct Labor (DLH) = 0.5 DLH X $12 = $6 Variable Overhead = 0.5DLHx$6 = $3 Fixed Iverhead* = $ 2,440,000 LIP System: Direct Material = $5.6 Direct Labor (DLH) = 0.8 DLH X $9 = $7.2 Variable Overhead = 0.8 DLH X $6 = $4.8 Fixed Overhead* = $1,320,000 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: Calculate the estimated…
The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows. CAM System: Direct Material = $5.0 Direct Labor (DLH) = 0.5 DLH X $12 = $6 Variable Overhead = 0.5DLHx$6 = $3 Fixed Iverhead* = $ 2,440,000 LIP System: Direct Material = $5.6 Direct Labor (DLH) = 0.8 DLH X $9 = $7.2 Variable Overhead = 0.8 DLH X $6 = $4.8 Fixed Overhead* = $1,320,000 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required 4. Describe the circumstances under…