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(solution) Question 1 Consider the following information, prepared based on


Question 1

Consider the following information, prepared based on a monthly capacity of 80,000 units:

Category

Cost per Unit

Variable manufacturing costs

$12.00

Fixed manufacturing costs

$5.00

Variable selling costs

$3.00

Fixed selling costs

$2.00

Capacity cannot be added in the short run and the firm currently sells the product for $29 per unit.

The company is currently producing 73,000 units per month. A potential customer has contacted the firm and offered to purchase 7,000 units this month only. Since the potential customer approached the firm, there will be no variable selling costs incurred. What is the minimum amount that the firm should be willing to accept for this order?

Question 2

A company is considering out-sourcing maintenance to an outside provider. What factors (financial and non-financial) should the company consider in making this decision? Be specific in your responses.

Question 3

Consider the following information, prepared based on a monthly capacity of 75,000 units:

Category

Cost per Unit

Variable manufacturing costs

$11.00

Fixed manufacturing costs

$3.00

Variable selling costs

$4.00

Fixed selling costs

$2.00

Capacity cannot be added in the short run and the firm currently sells the product for $28 per unit.

The company is currently producing 75,000 units per month. A potential customer has contacted the firm and offered to purchase 5,000 units this month only. The customer is willing to pay $25 per unit. Since the potential customer approached the firm, there will be no variable selling costs incurred. Should the company accept the special order? Why or why not? Be specific.

Question 4

Assume a company produces and sells four different products. Each product sells for a different amount, has different variable costs, and requires a different amount of machine hours to produce. Unfortunately, the company does not have enough machine hours to produce all the units of each product that it could sell. How should the company decide how many machine hours to use for each product? Be sure to explain and justify your recommendation.

Question 5

a) What is a transfer price?

b) How can firms use transfer prices to improve performance? Be specific in your explanations.

Question 6

The following is budgeted information for the Nicholas Corporation:

Product XYZ

Product ABC

Annual production & sales

45,000

5,000

Projected selling price

$45

$100

Variable Direct Production Cost Information

Materials (per unit)

$8

$18

Direct Labor (per unit)

$11

$24

Additional information:

Manufacturing overhead costs (a mixed cost) are budgeted to be $691,000 at the production and sales listed above. The variable component is $5 per unit (same for each product).

Selling & administrative costs (a mixed cost) are budgeted to be $500,000 at the production and sales listed above. The fixed component is $300,000, and each product uses the same amount of variable selling and administrative costs per unit.

Nicholas?s marginal tax rate is 40%.

Assuming the budgeted sales mix remains intact, how many units of each product does Nicholas need to sell in order to earn a net income of $148,200?

Question 7

One of the most important things to consider in developing a Balanced Scorecard is to include ?leading measures? or ?forward-looking measures? on the Scorecard. What are ?leading measures,? and how are they different from non-leading measures?

What does it mean that performance measures on a Balanced Scorecard are ?integrated?

 


Question 1 Consider the following information, prepared based on a monthly capacity of 80,000 units:

 

Category Cost per Unit Variable manufacturing costs $12.00 Fixed manufacturing costs $5.00 Variable selling costs $3.00 Fixed selling costs $2.00 Capacity cannot be added in the short run and the firm currently sells the product for

 

$29 per unit.

 

The company is currently producing 73,000 units per month. A potential customer has

 

contacted the firm and offered to purchase 7,000 units this month only. Since the potential

 

customer approached the firm, there will be no variable selling costs incurred. What is the

 

minimum amount that the firm should be willing to accept for this order? Question 2 A company is considering out-sourcing maintenance to an outside provider. What factors

 

(financial and non-financial) should the company consider in making this decision? Be

 

specific in your responses. Question 3 Consider the following information, prepared based on a monthly capacity of 75,000 units:

 

Category Cost per Unit Variable manufacturing costs $11.00 Fixed manufacturing costs $3.00 Variable selling costs $4.00 Fixed selling costs $2.00 Capacity cannot be added in the short run and the firm currently sells the product for

 

$28 per unit.

 

The company is currently producing 75,000 units per month. A potential customer has

 

contacted the firm and offered to purchase 5,000 units this month only. The customer is

 

willing to pay $25 per unit. Since the potential customer approached the firm, there will be no

 

variable selling costs incurred. Should the company accept the special order? Why or why

 

not? Be specific. Question 4 Assume a company produces and sells four different products. Each product sells for a

 

different amount, has different variable costs, and requires a different amount of machine

 

hours to produce. Unfortunately, the company does not have enough machine hours to

 

produce all the units of each product that it could sell. How should the company decide how

 

many machine hours to use for each product? Be sure to explain and justify your

 

recommendation. Question 5 a) What is a transfer price?

 

b) How can firms use transfer prices to improve performance? Be specific in your

 

explanations. Question 6 The following is budgeted information for the Nicholas Corporation:

 

Product XYZ Product ABC Annual production & sales 45,000 5,000 Projected selling price $45 $100 Materials (per unit) $8 $18 Direct Labor (per unit) $11 $24 Variable Direct Production Cost Information Additional information:

 

o Manufacturing overhead costs (a mixed cost) are budgeted to be $691,000 at

 

the production and sales listed above. The variable component is $5 per unit (same for

 

each product). o Selling & administrative costs (a mixed cost) are budgeted to be $500,000 at

 

the production and sales listed above. The fixed component is $300,000, and each

 

product uses the same amount of variable selling and administrative costs per unit. o

 

Nicholas?s marginal tax rate is 40%.

 

Assuming the budgeted sales mix remains intact, how many units of each product does

 

Nicholas need to sell in order to earn a net income of $148,200? Question 7 a. One of the most important things to consider in developing a Balanced

 

Scorecard is to include ?leading measures? or ?forward-looking measures? on

 

the Scorecard. What are ?leading measures,? and how are they different from

 

non-leading measures?

 

b. What does it mean that performance measures on a Balanced Scorecard are

 

?integrated?

 


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