16.

REVENUES VARIANCES
On the basis of the following data determine the revenues variances:

BUDGET ACTUAL
Quantity Pu Cu Quantity Pu Cu

Product A
1.000 20 14 1.400 24 16
Product B
600 30 20 400 26 18


17. Scarse factor

The leather shop SKINSILK produces 2 products (belts and bags):

products Pu VC u Production/sales
volume
Belts 100 50 2.000
Bags 200 150 1.500
We also know the annual production capacity of SKINSILK (equal to 10.000 machine hours) and
that to produce one belt the company needs 2 machine hours while to produce a bag 5 machine
hours. Determine the most economic mix of production/sales.

18. MAKE OR BUY: SHORT-RUN DECISION

Zed Ltd. Produces in a dedicated department a component (annual volume: 1.000 units) which unitary
cost is composed as following:

Unitary cost
Direct material € 50
Direct labor € 80
Machinery depreciation € 40
Machinery Power (variable
€ 20
part)
Industrial general overhead
€ 30
cost
Unitary total cost € 220

Tex company would offer the same component at a unitary price equal to 170 €. Having the additional
information, determine if for Zed ltd it economically convenient to accept the offer of Tex.
a) Machineries used are not employable in other productions, neither salable to third parties (useful
residual life: 4 years)
b) machinery used have a counter to measure machinery power consumes;
c) direct labor can be employed in other department.


19. MAKE OR BUY: SHORT-RUN DECISION

Krispy Srl produces in a dedicated department a component (annual volume 1.000 units) with the
following annual costs:

Direct materials 100.000

Machinery power 50.000
Direct labor (5 operative workers) 125.000
Supervisor 65.000
Machinery depreciation 50.000
Administrative costs quote 15.000
Annual total costs 405.000

An external supplier offers the same component at a unitary price equals to 370€. Having the
additional information, determine if it is economically convenient for Krispy to accept the offer of
the supplier.
a) Machinery power cost (50.000€) is composed by a fixed quote subdivided among all the
company’s departments according to the effective consumption (1.000€) and effective consumption
of electricity measured with an apposite (49.000€);
b) 3 operative workers are employable in an other department (cost 75.000€), the other two are
neither employable in other department neither be fired (cost 50.000€);
c) supervisor can leave the company and be hired by another company with a part-time contract at
60%;
d) the machinery can be employed in another department for 3 years (recovery value: 90.000€);
e) the department closure could reduce the administrative costs of 9.000€;
f) with the internal resources re-employed following the outsourcing, the company can obtain an
incremental annual margin equal to 50.000€.

20. MAKE or BUY: SHORT-RUN DECISION

Chocolate company produces a component whose annual volume is equal to 2000 units

Raw materials
 $35000
Direct labor (3 operative workers) $60000
Indirect employee (supervisor/manager) $30000
Machine depreciation
 $25000
Machine energy consumption $7000
Administrative expenses allocated to the department $11000

TOTAL annual costs: $168000

Vanilla company produces the same component at the unit price of $60. Knowing that in case of
outsourcing:
- the worker_1 (cost 20.000: assumption all the three op.workers have the same costs) can not be
moved to another department;
- the worker_2 can obtain the “unemployment insurance”;
- the
worker_3 and the supervisor can be moved to another department with a part-time contract at
the 50%;
-the machinary can not be moved to another department or sold;
- with the resources let free due
to the outsourcing process, the company can obtain an incremental annual margin of $10000;
Would you suggest the administrator to continue to make the component or to outsource its
production?