Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The following data are available: Iced Tea Soda Lemonade Sales price per unit $0.90 $0.60 $0.50 Variable cost per unit 0.30 0.15 0.10 Contribution margin per unit $0.60 $0.45 $0.40 Sensational is experiencing a bottleneck in one of its processes that affects each product as follows: Iced Tea Soda Lemonade Bottleneck process hours per unit 3 3 4 (a) Using a theory of constraints (TOC) approach, rank the products in terms of profitability. (b) What price for lemonade would equate its profitability (contribution margin per bottleneck hour) to that of soda

Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The following data are available: Iced Tea Soda Lemonade Sales price per unit $0.90 $0.60 $0.50 Variable cost per unit 0.30 0.15 0.10 Contribution margin per unit $0.60 $0.45 $0.40 Sensational is experiencing a bottleneck in one of its processes that affects each product as follows: Iced Tea Soda Lemonade Bottleneck process hours per unit 3 3 4 (a) Using a theory of constraints (TOC) approach, rank the products in terms of profitability. (b) What price for lemonade would equate its profitability (contribution margin per bottleneck hour) to that of soda

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 12E: Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two,...

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XYZ Drinks makes three products: iced tea, soda, and lemonade. The following data are available: Iced Tea Soda Lemonade Sales price per unit P9.00 P6.00 P5.00 Variable cost per unit 3.00 1.50 1.00 Contribution margin per unit P6.00 P4.50 P4.00 XYZ is experiencing a bottleneck in one of its processes that affects each product as follows: Iced Tea Soda Lemonade Bottleneck process hours per unit 3 3 4 The business cannot vary the selling price of Iced Tea and Lemonade. In determining the optimal production plan, what is the order of priority?
Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The following data are available: Line Item Description Iced Tea Soda Lemonade Sales price per unit $0.90 $0.60 $0.50 Variable cost per unit (0.30) (0.15) (0.10) Contribution margin per unit $0.60 $0.45 $0.40 Sensational is experiencing a bottleneck in one of its processes that affects each product as follows: Line Item Description Iced Tea Soda Lemonade Bottleneck process hours per unit 3 3 4 a. Using a theory of constraints (TOC) approach, rank the products in terms of profitability. Rank Product 1. 2. 3. b. What price for lemonade would equate its profitability (contribution margin per bottleneck hour) to that of soda? Round your answer to two decimal places.fill in the blank 1 of 1$
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: Annual sales volume Unit selling price Variable expense per unit Contribution margin per unit Velcro 101,800 $ 1.65 $ 1.25 $ 0.40 Metal 203,600 $ 1.50 $ 0.70 $ 0.80 Nylon 407, 200 $ 0.85 $ 0.25 $ 0.60 Total fixed expenses are $407,200 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $247,200 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business. The company's managers would like to…
Outsourcing Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 25% of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit 5,300 $ 106.00 No Direct materials per unit 23.00 ? Direct labor per unit 18.00 ? Variable manufacturing overhead per unit 14.00 Yes Fixed…
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: Velcro Metal Nylon 410,400 Annual sales volume 102, 600 1.65 $ 205, 200 Unit selling price Variable expense per unit Contribution margin per unit 1.58 $ e.85 1.25 $ 8.40 $ 8.70 0.25 8.80 $ 0.60 Total fixed expenses are $410,400 per perlod. Of the total fixed expenses, $20,000 could be avoided If the Velcro product is dropped, S80,000 If the Metal product is dropped, and $60,000 if the Nylon product Is dropped. The remaining fixed expenses of $250,400 consist of common fixed expenses such as administrative salarles and rent on the factory bullding that could be avoided only by golng out of business entirely. The company's managers would like to…
Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two, peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewer jars per case. Data concerning the two products follow: aPractical capacity less expected usage (all unused capacity is permanent). bIn some cases, activity capacity must be purchased in steps (whole units). These steps are provided as necessary. The cost per step is the fixed activity rate multiplied by the step units. The fixed activity rate is the expected fixed activity costs divided by practical activity capacity. Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity driver. aCosts associated with practical activity capacity. The machine fixed costs are all depreciation with direct labor hours as the driver. bThese costs are for the actual levels of the cost driver. Required: 1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours. Using this approach, determine whether the cashew butter product line should be kept or dropped. 2. Prepare an activity-based segmented income statement. Repeat the keep-or-drop analysis using an ABC approach.
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor - hours. Information concerning three of Portsmouth's products appears below: Recliner Sofa Love Seat Selling price per unit $1. 248 $1. 820 $1. 260 Variable cost per unit $ 800 $1.100 $ 900 Upholstery labor - hours per unit 8 hours 12 hours 4 hours Required: 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $55 per hour. The management of Portsmouth is…
Beans Corp. is a dairy manufacturer and processes two different products that can either be sold as is or processed further. Listed below are sales and additional data per unit: Product Sales price ‘As Is’ Additional Costs if processed further Sales price if processed further Milk $4.00 $1.90 $5.25 Cream $2.75 $0.15 $3.00 Based on the above information, which product(s) should Beans Corp. decide to process further?
Rosehill Co. manufactures two types of toilet paper: Ultra-strong and Ultra-soft. Because of a recent shortage of chlorine-based bleach, a key ingredient needed for the two products, the company has to decide the optimal amount of each product to produce. Information related to the two products that use chlorine-based bleach are shown below: Ultra-strong Ultra-soft Selling price per case $100 $96 Variable cost per case $40 $44 Chlorine-based bleach required per case (in liters) 10 8 Maximum monthly demand (in cases) 500 700 Assume that Rosehill Co. only has 7,200 liters of Chlorine-based bleach available next month. To maximize the company’s contribution margin next month, how many cases of Ultra-strong and how many cases of Ultra-soft the company should produce? Multiple Choice a)300 cases of Ultra-strong and 400 cases of Ultra-soft b)500 cases of Ultra-strong and 275 cases of Ultra-soft c)500 cases of Ultra-strong and 700 cases…
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: Velcro Metal Nylon Annual sales volume 101,800 203,600 407,200 Unit selling price $ 1.65 $ 1.50 $ 0.85 Variable expense per unit $ 1.25 $ 0.70 $ 0.25 Contribution margin per unit $ 0.40 $ 0.80 $ 0.60 Total fixed expenses are $407,200 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $247,200 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. The…
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: Velcro Metal Nylon Annual sales volume 101,800 203,600 407,200 Unit selling price $ 1.65 $ 1.50 $ 0.85 Variable expense per unit $ 1.25 $ 0.70 $ 0.25 Contribution margin per unit $ 0.40 $ 0.80 $ 0.60 Total fixed expenses are $407,200 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $247,200 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. The…
Outsourcing Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 30% of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit $ Direct materials 119.00 26.00 per unit Direct labor per unit 18.00 Variable manufacturing overhead per unit 14.00 Fixed manufacturing overhead (MOH): per month 30.00 Avoidable fixed MOH per month Unavoidable fixed MOH per month Sales commissions per unit 3.00 Advertising costs per month per unit Purchase price of outsourced product Shipping costs of outsourced product 1.80 59.00 1.00 per unit Costs per unit Incremental analysis Manufacture Variable costs Enter "=0" in the cell for any cost not relevant to the decision. Direct materials…