T. (20 pts) Sunshine Fruit Co. mak 80,000 boxes is: es its own shipping boxes. T
ID: 2600358 • Letter: T
Question
T. (20 pts) Sunshine Fruit Co. mak 80,000 boxes is: es its own shipping boxes. The annual cost to make Materials Labor Indirect Manufacturing Costs $120,000 20,000 Variable Fixed 16,000 -60.000 $216,000 Total Suppose Weyerhouser offers to sell them boxes for $2.10 per box a) Given the above, should Sunshine Fruit make or buy the b) Suppose that all the above es Jixed costs are depreciation for equipment which is at the end of its 10-year life and was purchased for $600,000. New replacement equipment wrill cost S800,000 and have a 10-year life also. Will this fact make a difference for the make or buy decision? 2. (20 pts) A tool company sells a plain (price $50, variable cost $35) and a professional (price $100, variable cost $60) circular saw. It takes one machine-hour to produce a professional and 15 minutes to produce a regular saw. There are 40,000 machine-hours available and demand is more than they can produce. a) Compute contribution margins and contribution margin ratios for each saw. b) fall machine hours are used, compute the total contribution margin for plain saws only and professional saws only. Which saw should be produced? 3. (20 pts) The Edgerton Co. Produces products A, B, and C from a joint process. The joint costs for 2013 were $72,000. All three products can be processed further and the pertinent information follows Sale s Value Sales Value if Added Cost to Item Units Produced At Split Off Processed further Process Further A 6,000$25,000 $42,000 B 4,000 $9,000 7,000 10,000 41,000 45,000 C 2,000 24,000 32,000 a) To maximize profits, which product(s) should be processed further? b) If Cis to be processed further, what should its final price be to break-even? PLEASE TURN OVERExplanation / Answer
Solution:-
1. a)
Its better to manufacture (make) boxes in house due to lower cost in manufacturing.
b):-
Its better to buy boxes insted of purchasing new equipment due to lower cost.
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Statement of comperative cost Manufacturing Purchase Materials 120,000 Cost per box 2.10 Labor 20,000 Indirect variable manufacturing cost 16,000 Total cost 156,000 Number of boxes produced 80,000 Cost per box 1.95Related Questions
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