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Current Costs in

2014
Variables Manufacturing Costs
DM Per Unit
DML per Unit
Variable MOH per Batch

$
$
$

180
50
1,600

Fixed Manufacturing Cost
Fixed MOH that can be avoided if CMCBs are not made
Fixed MOH that can't be avoided even if CMCBs are not made

$
$

320,000
800,000

Unit Produced
Batches
CMBC Price per unit from Mind Blown
Total Expected Incremental Futures Revenues
Total Expected Incremental Futures Costs

8000
40
300
2,000,000
2,150,000

1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2015.
Total
Manufacturing
cost of CMCB
DM
DML
Variable MOH per Batch
Fixed MOH Cost
Avoidable
Unavoidable
Total Manufacturing Cost

$
$
$

1,700,000
450,000
120,000

$
$
$

320,000
800,000
3,390,000

2. Make or Buy?

Total Incremental Costs
Make

Incremental Items
Cost of Purchasing CMCB from Mind Blown
DM
DML
Variable MOH
Avoidable Fixed Manufacturing Costs
Total Incremental Cost

$
$
$
$
$

1,700,000
450,000
120,000
320,000
2,590,000

590.590.410.000 $ 2. Step Son will manufacture CMCB by itself 2.000 Opportunity Cost Approach Total Incremental Costs Opportunity Cost Total Relevant Cost $ .000 $ 2. Make.000 0 2.590. Don't Make CB3s $ 2.590. or make CB3? Total Alternatives Approach Coices for Ste Relevant Items Total Incremental Cost Excess Future cost over revenue from CB3s Total Relevant Cost Make CMCB.0 Difference Because costs to manufacture are lower than costs to buy. Buy.

000.000 $ 3.000.000 10000 80 Manufacturing cost per unit $ $ $ 170 45 12 $ $ $ 32 80 339 tal Incremental Costs Buy $ 3.000 800.500 $ $ 320.000 $ $ $ $ $ Per Unit Incremental Costs Make Buy $ 300 170 45 12 32 259 $ 300 .Expected Costs in 2015 $ $ $ 170 45 1.

000.000.000 $ 3.000.000 $ 3.000 0 0 3.000 $ 3.000 $ 3.000 41 .410.150.000.000.000 $ 3.00 $ ture CMCB by itself Coices for Step Son Buy CMCBs and Don't Make CM3s Buy CMCBs and Make CB3s $ 3.000.000 $ $ 3.000.000.000 $ 150.

500 Without One Time $ 1. Should it accept special order if the existing customer demand a $10 discount? .500 $ $ $ $ 275.500 $ 300.500 2.Variable Costs that Vary with numbers of units produced DM DL Variable costs that Vary with number of batches Fixed Manufacturing costs Fixed Marketing Costs Total Costs Unit Sold Special Order 1.225.500 Quantity 7.000 $ 175.202. Should it Accept the special order? Revenue Varuable Costs DM DL Batch cost Fixed Costs Fixed Manufacturing cost Fixed Marketing costs Total Costs Operating Income $ 262.000 $ $ $ $ 275.000 360.500 2.500 300.000 $ $ $ 315.if the capacity decreased to 9000.500 22.000 1.000 $ 1.087.000 1.000 75. should it accept the special order? Revenue Varuable Costs DM DL Batch cost Fixed Costs Fixed Manufacturing cost Fixed Marketing costs Total Costs Operating Income $ 1.000 175.500 using direct method (incremental method 3.125.000 $ 275.000 $ 75.000 $ $ $ 262.000 77.000 175.500 37.087.

000) .Operating Income by selling 2500 OI lost $ $ Rejected 50.000 75000 (25.

000 $ 87.000 $ 100.Selling Price $ $ Batches 150 100 150 25 With One time Order Difference 1375000 $ 250.500 $ 275.000 87.000 87.000 $ 1.500 $ 12.500 $ 200.500 $ 50.000 .500 400.287.000 $ 175.000 $ $ $ $ 350.

.

Standard Model $ $ $ 16.355 . Derermine dollar contribution each altervanive Alternative 1 .200 4.Johnson Corp Selling Price Cost DM DL Sales Commision Manufacturing Overhead VOH FOH Fixed SA Total Cost Total Operating Income Alternative 2 .100 1.420 $ $ $ 2.200 3.050 2.Cost Already Incurred Direct Material Direct Labor Variable MOH Fixed MOH Fixed Selling and Adminis Total Johnson Corp Direct Material Direct Labor Total to Standard Direct Material Direct Labor Total Unmodified Selling Price Manufacturing Cost Variable Fixed Fixed Selling and Adminis Sales Commision Discount 1.

700 .968 $ 25.968 $ 70. Alternative 2 gives highest operating income 2.800 $ $ $ 1.800 3.400 10. What is the minimum price to Johnson ? Highest Operating profit among 3 Alternatives Total Cost if the Equipment is bought by John Minimum Selling Price $ 40.700 58.Unmodified Selling Price Additional Cost Total Operating Income Based on calculation above.300 1.650 825 1.600 21.11 3.Selling Price Sales Discount Cost DM DL Sales Commision Manufacturing Overhead VOH FOH Fixed SA Total Cost Total Operating Income $ $ $ 8.392.(25. If there's no potential buyer.905 SP . what is the minimum selling price? Direct Material Direct Labor Variable MOH Total 26.905 + 0.05 SP) = 40.458 Alternative 3 .

400 Selling Pric 68400 8.325 39.000 50% of DL Costs 25% of DL Costs 10% of the total of DM. DL.800 3.100 Selling Pric 60000 40.405 79.200 4.075 5% .350 15.26.200 20. MOH 3% or 2% $ 68.455 16.400 10.400 $ $ 29.600 21.300 12.700 5.

968 .000 1.000 0 40.833 40.05 SP 0.000 +0.05 SP) = 40.968 40.$ $ 60.200 $ $ 17.

800 allocation based on highe 2400 5.A220 $ Selling Price Variable Costs DM $ Labor and Other Costs $ Quantity of Portside 8lb B106 84 $ C118 56 $ 24 28 15 $ 27 $ 3lb $ $ 5lb 70 9 40 1.000 1600 200 1000 200 Total 200 3 600 3.000 800 .80 $ $ $ $ $ 70 9 40 49 21 7 per lb Distribution of Production A220 Minimum Unit Pounds per Unit Pounds needed Remaining Pounds allocated Total Total Unit produced B106 C118 200 8 1. How Many units of product? Selling Price Variable Cost DM DL Total Variable Cost Contribution Margin CM per Pound A220 $ $ $ $ $ $ B106 84 $ 24 28 52 32 4 $ $ $ $ $ C118 56 $ 15 27 42 14 2.600 200 5 1.200 1.

location based on highest CM per pound item .