Kohli 1 Japneet Kohli Professor Barden ACCT 2302.002 November 16, 2012 CASE 1A 1.

Contribution Margin = Sales Variable Expense Therefore, Contribution Margin per unit = (Sales Variable Expense) / Number of Units= Price per unit Variable Expense per unit Bud Companys machine can work for 15,000 hours in a year. Therefore, following can be deduced from the above information:

MBV Selling Price Less: Variable Cost Contribution Margin per unit Divide: Hours of Production Machine Hrs Required Total Units Produced $29.00 ($15.00) $14.00 (15,000) /(.50) 30,000

LUX $32.00 ($20.00) $12.00 15,000 /(.50) 30,000

BUD E $59.00 ($47.00) $12.00 15,000 /(.75) 20,000

Therefore, the MBV car stereo should be favored for production as its Contribution Margin per unit is the highest among the three stereo models. It follows that all the hours of production should be devoted towards production of MBV car stereo to maximize the Contribution Margin of Bud Company. Therefore, Contribution Margin = Contribution Margin per unit*Number of Units = 14.00*30,000 = $420,000 2. Return % per unit = ((Selling Price Cost per unit) / Cost per unit)*100 Therefore, for MBV stereo: New Selling Price = $ x Cost per unit = $15.00 Therefore, if return on sales is 60%, then (100 60 =) 40% is the value of the cost per unit from the selling price. Therefore, 40% of x = 15 x = 15/40% = (15*100)/40 = 37.5

Kohli 2 Therefore, for a return of 60% on the sales, the selling price of MBV stereo = $37.50

CASE 2A 1. I think that Bracie should not have told Johnnie about the impending decision regarding the internal production of car stereos versus their purchase from an outside company. By telling Johnnie, Bracie is acting against the interest of BUD STEREOS. This is a dishonest move, and since Bracie and Johnnie are romantically involved, this move can be interpreted as an act to save the interests of the potential husband. I think that the Code of Ethics for this particular company would also favor the position that Bracie should not have told Johnnie. In fact, most companies that have profit-above-everything-else as their prime motivation (which seems to be BUD COMPANYS motive too, inferring from the manner in which the President Stevie Slim is portrayed) would take this stand in their code of ethics. The current economic situation is bad, and BUD COMPANY must do everything it possibly can to save itself and decrease its losses. If, by laying off the Stereo Department and outsourcing the production, they can reduce their losses or turn over a profit, then they should go ahead and do it.

2. Bracie should provide the correct data to Stevie. I would do the same and provide the correct data if I were in her shoes. As the Chief Management Accountant and Controller, it would be part of my job to provide all the relevant and correct data in order to make any decision. If I provide the wrong data, I would be committing fraud with the company. It would be unethical for me to provide the wrong data, just as it would be unethical for Bracie too. Stevie Slim should have all the data with him when he makes the decision regarding outsourcing. Now whether he keeps the Stereo Department or lets it go is a decision he has to make and would be influenced by his ethics, which define the companys code of ethics too. The current economy is tough for both the employees and the company. As the President, he has to decide whether the welfare of his employees is more important than the profits of his company.