Exam 7: Relevant Costs and Product Planning Decisions

Averette & Averette Averette & Averette, a local dental practice, currently makes its own dentures for customers. The dental practice has one part-time employee who comes in weekly to make dentures. The employee is paid $150 per denture set. The direct materials and variable overhead cost per set of dentures is $75 and $25, respectively. In addition, the practice allocates $10,000 of fixed overhead to the denture-making department. The practice makes 1,000 sets of dentures per year. An outside company who specializes in the making of dentures has offered to make each set of dentures for Averette & Averette for $255 per set. Refer to the Averette & Averette information above. What are Averette & Averette's total relevant costs to make the dentures themselves?

Serenity Garden Inc. Serenity Garden Inc. produces and sells a variety of garden accessories. One of the product lines the company makes is unpainted gnome statues that come in three sizes: small, medium, and large. The company is considering painting the gnomes. The following information is available regarding unpainted and painted gnomes: Refer to the Serenity Garden Inc. information above. Which gnomes, if any, should be painted?

Collegiate Products produces and sells padded stadium seats emblazoned with a university logo. The company has the capacity to produce as many as 6,000 seats per month but consistently averages much less. When 4,500 seats are produced, each seat has $5 of variable costs and $2 of fixed overhead costs allocated to it. The seats typically sell for $12 each. The company has been approached by a small college who wishes to purchase 500 seats for special alumni at a price of $5 per seat. If the special order were accepted, net income would:

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: Required:

A particular product line should not be dropped if:

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: Refer to the Wright Manufacturing information above. What is the maximum amount of increase in net income from further processing?

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

Which of the following would not be a factor in the consideration of whether or not a special order should be accepted?

Kellerman Detailing Service Kellerman Detailing Service provides two types of car detailing packages: the standard and the deluxe. Selected data related to each package is as follows: Most of the car detailing is done by hand. Refer to the Kellerman Detailing Service information above. For the upcoming year, there is a maximum of 4,300 direct labor hours available. Management believes that the demand for both the standard and deluxe detailing is limited to 1,000 each per year. If the company maximizes profits, what is the maximum contribution margin the company could have in the upcoming year?