Problem 11-9 :

The financial ( advantage ) of discontinuing House-Keeping is computes as follow :

Lost contribution to margin : -80000

Fixed cost that can be avoided
Liability Insurance 15000
Program administatior's salary 37000 52000
The financial ( advantage ) of discontinuing -28000
House-Keeping

Req 2 :

Total
Sale 900000
Variable Expense 490000
Contribution Margin 410000

Traceable fixed expense :

Depreciation 68000
Liability Insurance 42000
Program administators's salary 115000
Total Traceable fixed expenses 225000
Program segment margin 185000
General administrative overhead 180000
Net Operating Income ( Lost ) 5000

Problem 11-20
Req1 1 pound = 16 ounce
Amount
Sale from futher processing :
Sale price of one filet mignon 4.5
Sale price of one NY cut 4.4
Total Revenue from further processing 8.9
Less : Sales Revenue from one t-bone steak 7.95
Incremental revenue from further processing 0.95
Less: Cost of further processing 0.55
Profit per pound from further processing 0.4

Req2 :
Yes, Cuz it bonuses 0.4$ per pouce

Problem 11-22
Req1 :
Incremental Revenue 210000
Less : Cost associated with
special order
Direct Material 75000
Direct Labor 40000
Variable MOH 15000
Variable Selling Expense 5000
Less :Cost of new machine 10000
Total Expense : 145000
Financial Advantage : 65000

Req2:

Total cost per Unit 45

Less: Fixed + Variable
Selling Expenses 10
Cost reimbursed 35
Add : Fixed Fee 1.8
Revenue per unit 36.8
Total Revenue of order 184000

Req3 :
When Army canceled the order => the Business recorded a loss on Contribution Margin
Selling price 50
Less : Variable cost
Direct Material 15
Direct Labor 8
Variable MOH 3
Variable Selling Expenese 4
Total Variable cost 30
Contribution Margin 20
Loss on Contribution Margin 100000

Incremental Revenue 184000

Less : Cost associated with
Direct Material 75000
Direct Labor 40000
Variable MOH 15000
Total Expenses 130000
Less : Loss on Contribution Margin 100000
Financial Disadvantage -46000

Problem 11-23
Req1 +2 +3 Total Relevant
Cost - 100000 boxes
Origin Buy Tubes
Direct Material 360000 270000
Direct Labor 200000 180000
Variable overhead 50000 45000
Fixed Overhead 90000 90000
Add: Empty tubes 135000
Total Cost 700000 720000
Financial Disadvantage of Buying Tubes

Req 4 : Make tube, not buy

Req 5 :
Silven should consider the Financial Status of each situation . In this case, The cost of buying outsider's tube should
So, The maximum can Silven can pay is : 115000 or
Req 6 :

Total Relevant
Cost - 120000 boxes
Origin Buy Tubes
Direct Material 432000 324000
Direct Labor 240000 216000
Variable overhead 78000 70200
Fixed Overhead 90000 90000
Add : Rent Extra Equipment 40000
Add: Empty tubes 162000
Total Cost 880000 862200
Financial Advantage of Buying Tubes

So, buy tubes, not make

Req7 :
This situation, Silven can both buy and make tubes themselves
First, we consider that Manufacturing cost ( DM, DL, MOH is stable ), we consider the cost of renting extra equipme
Second, The cost of renting extra euquipment make Buying tube become a better choice than making ( It was oppos
Third , Because of the change of better choice, basically relating to the Increase of Cost of Making ( Renting Extra E
Forth , So we would choose to not renting extra equipment, we only make to 100000 boxes, then buy 20000 boxes f

This lead to the cost :

Cost of 120000 boxes

Making 100000 tubes Buy 20000 Tubes
Direct Material 360000 54000
Direct Labor 200000 36000
Variable overhead 50000 9000
Fixed Overhead 90000
Add: Empty tubes 27000
Total Cost 700000 126000

As We can see, this total cost this situation is the lowest of 120000 boxes , so this is the best choice

Req8 :

Should consider The new cost needed for larger volume and cost of manufacturing
 ( if continuing the House-Keeping, the business would lost 12000$ more )

Home Meals On House

Nursing Wheels Keeping
260000 400000 240000
120000 210000 160000
140000 190000 80000

8000 40000 20000

20000 7000 15000
40000 38000 37000
68000 85000 72000
72000 105000 8000
Incremental Revenue 184000
Less : Cost associated with
Direct Material 75000
Direct Labor 40000
Variable MOH 15000
Total Expenses 130000
Financial advantages 54000

Cost avoidable : 1.15

 -20000 -0.2 per box

ng outsider's tube should equal or lower than the cost of original production
1.15 per tub

17800

of renting extra equipment

han making ( It was opposite previously )
Making ( Renting Extra Equipment )
s, then buy 20000 boxes from outsider

Total
414000
236000
59000
90000
27000
826000