Chapter 11 Exercises :

11-22 page 483 Make or buy . Answer the following questions.

DeCesare Computers makes 5,200 units of a circuit board, CB76, at a cost of $280 each. Variable
cost per unit is $190 and fixed cost per unit is $90. Peach Electronics offers to supply 5,200
units of CB76 for $260. If DeCesare buys from Peach it will be able to save $10 per unit in
fixed costs but continue to incur the remaining $80 per unit. Should DeCesare accept Peach’s
offer? Explain.
11-24 page 484 Special order. (CMA, adapted) The Gold Plus Company manufactures medals for
winners of athletic events and other contests. Its manufacturing plant has the capacity to produce
11,000 medals each month. Current production and sales are 10,000 medals per month. The
company normally charges $150 per medal. Cost information for the current activity level is as
follows:

Variable costs that vary with number of units produced

Direct materials $ 350,000
Direct manufacturing labor 375,000
Variable costs (for setups, materials handling, quality control, and so on) 100,000
that vary with number of batches, 200 batches * $500 per batch
Fixed manufacturing costs 300,000
Fixed marketing costs 275,000
Total costs $1,400,000

Gold Plus has just received a special one-time-only order for 1,000 medals at $100 per medal.
Accepting the special order would not affect the company’s regular business. Gold Plus makes
medals for its existing customers in batch sizes of 50 medals (200 batches × 50 medals per batch =
10,000 medals). The special order requires Gold Plus to make the medals in 25 batches of 40
medals.

Should Gold Plus accept this special order? Show your calculations.
11-42 page 492 Product mix, constrained resource. Wechsler Company produces three products:
A130, B324, and C587. All three products use the same direct material, Brac. Unit data for the three
products are:

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The demand for the products far exceeds the direct materials available to produce the products. Brac
costs $9 per pound, and a maximum of 5,000 pounds is available each month. Wechsler must
produce a minimum of 200 units of each product.

How many units of product A130, B324, and C587 should Wechsler produce?