1-Zollars Cane Products, Inc

1-Zollars Cane Products, Inc., processes sugar cane in batches. The company buys a batch of sugar cane from farmers for $70 which is then crushed in the company's plant at a cost of $19. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $21 or processed further for $13 to make the end product industrial fiber that is sold for $42. The cane juice can be sold as is for $44 or processed further for $26 to make the end product molasses that is sold for $88. How much profit (loss) does the company make by processing one batch of sugar cane into the end products industrial fiber and molasses?

2.-

An outside supplier has offered to sell the company all of these parts it needs for $45.70 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $318,000 per year.
If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $3.50 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

How much of the unit product cost of $40.50 is relevant in the decision of whether to make or buy the part?

4.-

The milling machines are potentially the constraint in the production facility. A total of 11,500 minutes are available per month on these machines.

How many minutes of milling machine time would be required to satisfy demand for all four products?

Principio del formularioPart I51 is used in one of Pries Corporation's products. The company makes 18,000 units of this part each year. The company's Accounting Department reports the following costs of producing the part at this level of activity:
5.-
An outside supplier has offered to produce this part and sell it to the company for $15.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $26,000 of these allocated general overhead costs would be avoided.
If management decides to buy part I51 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?

6.-

The constraint at Mcglathery Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?

7.

An automated turning machine is the current constraint at Naik Corporation. Three products use this constrained resource. Data concerning those products appear below:

Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

5 points

5 points

A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would:

A customer has requested that Inga Corporation fill a special order for 2,000 units of product K81 for $25.00 a unit. While the product would be modified slightly for the special order, product K81's normal unit product cost is $19.90:
8.-

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product K81 that would increase the variable costs by $1.20 per unit and that would require an investment of $10,000 in special molds that would have no salvage value.
This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: