Relevant cost to buy

2,000 * 170 340,000.00

Relevant cost to make

Direct materials 120,000.00
Direct labor 100,000.00
Variable overhead 60,000.00
280,000.00

Cost savings 60,000.00

Cost to buy
2,000 * 170 340,000.00
Fixed cost 80,000.00
420,000.00

Cost to make
Direct materials 120,000.00
Direct labor 100,000.00
Variable overhead 60,000.00
Fixed cost 80,000.00
360,000.00

Cost savings 60,000.00

Incremental revenue from SO
400 * 32 12,800.00
Less: Incremental cost
Variable manufacturing cost
400 * 24 9,600.00
Variable GSA
400 * 1.25 500.00
Incremental profit 2,700.00

With SO Normal Sales Difference

Sales
(2,000*40)+(400*32) 92,800.00
(2,000*40) 80,000.00 12,800.00
Less: Variable cost
(2,000*26.5)+(400*25.25) 63,100.00
(2,000*26.5) 53,000.00 10,100.00
Contribution margin 29,700.00 27,000.00 2,700.00
Less: Fixed cost 19,500.00 19,500.00 -
Profit 10,200.00 7,500.00 2,700.00

Incremental contribution margin

500 * (45 - 26.5) 9,250.00
Less: Lost contribution margin
500 * (40 - 26.5) 6,750.00
Less: Additional fixed cost 5,000.00
Incremental loss - 2,500.00

With SO Normal Sales Difference

Sales
(1,500*40)+(500*45) 82,500.00
(2,000*40) 80,000.00 2,500.00
Less: Variable cost
(2,000*26.5) 53,000.00 53,000.00 -
Contribution margin 29,500.00 27,000.00 2,500.00
Less: Fixed cost 19,500.00 19,500.00
Additional fixed cost for SO 5,000.00 5,000.00
Profit 5,000.00 7,500.00 - 2,500.00

Currrent operating income 134,800.00

Less: Product L Contribution margin 60,000.00
Add: Cost savings supervisor salary 40,000.00
Operating income after Product L 114,800.00

Difference 20,000.00

SE OU Total
Sales 400,000.00 360,000.00 760,000.00
Variable costs 280,000.00 216,000.00 496,000.00
Contribution margin 120,000.00 144,000.00 264,000.00
Fixed costs
Salaries of product line supervisors 30,000.00 32,000.00 62,000.00
Allocated marketing costs 11,157.89 10,042.11 21,200.00
Allocated administrative costs 33,000.00 33,000.00 66,000.00
Operating income 45,842.11 68,957.89 114,800.00

Operating income with Product L 134,800.00

Operating income without Product L 114,800.00
Decrease in operating income 20,000.00
Total unavoidable fixed cost
(100,000 - 25,000)* 6 450,000.00
Additional costs 20,000.00
Estimated cost of resuming operations 75,000.00
Total shut down costs 545,000.00

Fixed cost at normal operations

100,000*6 600,000.00
Less: Total shut down costs 545,000.00
Shut down savings 55,000.00

OR

Fixed cost avoided during shutdown 150,000.00

Less: Additional cost 20,000.00
Estimated cost of resuming operations 75,000.00
Shut down savings 55,000.00

Shutdown savings 55,000.00

Divide by: CM at lower selling prices
(350 * .9) - 280 35.00
Shutdown point, in units 1,571.43

1. 1,000 books shutdown

2. 2,000 books continue

 A B C
Sales vale after processing further 80,000.00 120,000.00 45,000.00
Less: Sales value at split off point 60,000.00 75,000.00 30,000.00
Incremental revenue 20,000.00 45,000.00 15,000.00
Less: Cost of processing further 25,000.00 30,000.00 5,000.00
Profit (Loss) from processing further - 5,000.00 15,000.00 10,000.00

Process further? No Yes Yes

A B C
Sales value at split off point 60,000.00 75,000.00 30,000.00
Less: Allocated joint product costs 40,000.00 50,000.00 20,000.00
Profit from selling at split off point 20,000.00 25,000.00 10,000.00

Sales value after processing futher 80,000.00 120,000.00 45,000.00

Less: Cost of production
Allocated joint product costs 40,000.00 50,000.00 20,000.00
Cost of processing further 25,000.00 30,000.00 5,000.00
Profit (Loss) from processing further 15,000.00 40,000.00 20,000.00

Inc (Dec) in profit at processing further - 5,000.00 15,000.00 10,000.00

Process further? No Yes Yes

 Sanitaza Alcool
Selling price per unit 100.00 125.00
Variable cost per unit 70.00 80.00
Contribution margin per unit 30.00 45.00
Machine hours per unit 1 3
Contribution margin per machine hour 30.00 15.00

Sanitaza machine requirement

At demand (units) 3,800.00
Multiply: Machine hours per unit 1.00
Total machine hours needed 3,800.00

Product allocation
Total machine hours 5,000.00
Allocated to Sanitaza 3,800.00
Allocated to Alcool 1,200.00

Calculation of total CM machine hours

Sanitaza (3,800*30) 114,000.00
Alcool (1,200*15) 18,000.00
132,000.00

Calculation of total CM based on units

Sanitaza (3,800*30) 114,000.00
Alcool (1,200/3*45) 18,000.00
132,000.00
Cost of new machine 1,000,000.00
Cash received to trade in 250,000.00
Reduction in variable costs 720,000.00
Expected inc (dec) in benefits - 30,000.00
 8.24
1.a)
Relevant cost to make
Direct materials 300,000.00

1.b)
Relevant cost to purchase
Cost to purchase 345,000.00
Less: Savings 30,000.00
315,000.00

Difference - 15,000.00

2.) Supporting small and local company

8.25
1.) Selling price 2,500.00
Variable cost 5,000.00
- 2,500.00

2.) Selling price 2,500.00

Variable cost 800.00
1,700.00

3.) Contract 2,500.00

Divide: Average cost w/o contract 90.00
Rooms 27 round down
Divide: 50.00
Percentage 54%

8.34
Jingle Belle
Sales 20,000.00 30,000.00
COGS 10,000.00 18,000.00
Gross Profit 10,000.00 12,000.00
Fixed cost
Administrative 7,500.00 7,500.00
Selling 3,000.00 4,500.00
Profit - 500.00 -

Operating income with Gifts 2,000.00

Operating income without Gifts - 500.00
Decrease in operating income 2,500.00

8.41
Total unavoidable fixed cost 120,000.00
Additional costs 25,000.00
Estimated cost of resuming operations 20,000.00
Total shut down costs 165,000.00
 Fixed cost at normal operations 200,000.00
Less: Total shut down costs 165,000.00
Shut down savings 35,000.00

Shutdown savings 35,000.00

Divide by: CM at lower selling prices 10.00
Shutdown point, in units 3,500

8.43
1.) Y Z
Sales 500.00 800.00
Variable cost 200.00 400.00
Contribution margin 300.00 400.00
Fixed cost
Avoidable 100.00 120.00
Common 123.08 196.92
Profit 76.92 83.08

2.) Total fixed oost 750.00

Add: Profit 280.00
Total contribution margin 1,030.00
Less: CM without P 900.00
Total Product P CM 130.00
Divide: Product P CM per unit 2.00
No. units to sell 65

3.) Sales 1,020.00

Variable cost 550.00
Contribution margin 470.00
Fixed cost 280.00
Profit 190.00

4.)

8.45
1.) Product 1 Product 2
Selling price per unit 12.00 16.00
 Variable cost per unit 7.00 8.00
Contribution margin per unit 5.00 8.00
Machine hours per unit 0.10 0.17
Contribution margin per machine hour 50.00 48.00

2.) Units (200/0.1) 2,000.00

Sales 24,000.00
Variable cost 14,000.00
Contribution margin 10,000.00

3.) Required CM per machine hour 50.00

Multiply: Machine hours per unit 0.17
Contribution margin per unit 8.33
Add: Variable cost per unit 8.00
Selling price 16.33
Total
50,000.00
28,000.00
22,000.00
-
15,000.00
7,500.00
- 500.00
Total
1,300.00
600.00
700.00
-
220.00
320.00
160.00

Product 3
21.00
10.00
11.00
0.25
44.00