Exam 10: Relevant Costs and Product Planning Decisions

Which of the following is most likely to represent a bottleneck?

Sugarhill Products makes a wood product in three sizes: small,medium,and large.Currently,the company does not stain any of the products,but market research has indicated that they can be sold with or without a finishing stain.The following information is available: Initial sales price \ 1500 \ 2300 \ 4000 Initial cost 500 800 1300 Sales price after staining 1650 2400 4400 Cost of staining 100 190 300 Number sold per vear 300 300 150 Required: A. Which products should be staned? Support your answer with calculations. B. If all the products are stained, what is the overall effect on net income? Support your answer with calculations

Wright Manufacturing Wright Manufacturing makes picnic tables in three sizes: small, medium, and large. The picnic tables can be sold with or without a finishing stain. The following information is available for each table: Small Medium Large Initial sales price \ 60 \ 100 \ 1/5 Initial cost 20 40 55 Sales price after staining 70 125 210 Cost of staining 11 15 20 Number sold per month 100 300 175 -What is the maximum amount that net income could increase each month with further processing?

Joyner Products Joyner Products makes cedar garden benches in three sizes: small, medium, and large. Joyner sells the benches to local retailers. The benches can be sold with or without assembly. The following information is available for each table: . Small Medium Large Initial sales price \ 90 \ 150 \ 250 Initial cost 30 45 70 Sales price after assembly 110 180 260 Cost of assembly 15 20 25 Number sold per month 120 350 150 -What is the maximum amount that net income could increase each month with further processing?

Hannah's Homemade Cookies produces and sells delicious shortbread cookies.The cost of producing a bag of cookies is $.65 and the bag sells for $3.75.Hannah is considering processing all the cookies further by dipping them in chocolate.The additional processing costs would be $.50 per bag and the sales price of the chocolate-dipped cookies would be $4.20 per bag.If Hannah can sell 5000 bags of either type of cookie per year,which of the following statements is true if she chooses to process the cookies further?

Which of the following types of costs should always be considered in special order decisions?

Decker Products Decker Products manufactures standard and deluxe wooden swing sets. Selected data related to each product is as follows: Standard Deluxe Sales price per unit \ 900 \ 2000 Direct materials per unit 100 500 Direct labour per unit 300 700 Variable overhead per unit 50 100 Machine hours per unit 4 8 Most of the manufacturing process for the sets is done on machines. There is a maximum of 10 000 machine hours available each year. -If demand were strong for both sets and the company could sell an unlimited number of either style,how many of which kind(s)of wooden swing set(s)should be produced in order to maximise profits?

A local skating rink charges each person $5 to skate and another $3 for each skate rental.The rink has determined that on a daily basis,when 100 tickets are sold,the costs per skater are $.50 for variable costs and $1 for fixed overhead costs.The rink has the capacity for up to 175 skaters per day.A local kid's day camp has asked the rink to allow up to 35 children to skate for $2.50 each on 15 July.This price would include the cost of a skate rental.During July,the rink averages 100 skaters per day. Required: A. List two qualitative factors that should be considered by the rinls before accepting the special order. B. What are the total relevant costs of accepting the special order? C. From a quantitative basis, should they accept the special order? By what amount will the rink's net income increase or decrease if they accept the special order?

Speed Quest Inc.manufactures speed boats.Currently,the company manufactures its own engine for the boats at the following unit costs: Direct materials \2 5.00 Direct labour \4 0.00 Variable overhead \1 5.00 Fixed overhead \2 0.00 Another manufacturer has offered to supply Speed Quest with the engine at a cost of $85 each.Speed Quest currently makes 1000 boats annually.If Speed Quest accepts the offer,what will be the short-term impact on net income?

Decker Products Decker Products manufactures standard and deluxe wooden swing sets. Selected data related to each product is as follows: Standard Deluxe Sales price per unit \ 900 \ 2000 Direct materials per unit 100 500 Direct labour per unit 300 700 Variable overhead per unit 50 100 Machine hours per unit 4 8 Most of the manufacturing process for the sets is done on machines. There is a maximum of 10 000 machine hours available each year. -What is the contribution margin per unit of limited resource for each type of set?

Assuming there is sufficient customer demand either way,how does a company decide whether to sell a product 'as is' or to process it further? When should it be processed further?

Which of the following statements is true when a company is considering whether or not to make or buy (outsource)a component of a product that it currently manufactures?

Decker Products Decker Products manufactures standard and deluxe wooden swing sets. Selected data related to each product is as follows: Standard Deluxe Sales price per unit \ 900 \ 2000 Direct materials per unit 100 500 Direct labour per unit 300 700 Variable overhead per unit 50 100 Machine hours per unit 4 8 Most of the manufacturing process for the sets is done on machines. There is a maximum of 10 000 machine hours available each year. -If demand were strong for both sets and the company could sell an unlimited number of either style,what is the maximum total contribution margin the company could have?

In the production process,bottlenecks:

Carolina Potato Inc.currently sells cut sweet potatoes for $.85 per can.The cost of producing the sweet potatoes is $.18 per can.Carolina Potato is considering starting a line of mashed sweet potatoes.The additional processing costs would be $.06 per can and each can would sell for $.95.Which of the following pieces of information is not relevant to the decision to sell 'as is' or process further?