Marginal Analysis.

Group 203. Activity 5

A. A profitable company produces a special product for its main customer with a production
cost of $1000, which $700 are variable costs and $300 fixed. Moreover, there are
operation expenses of $10 per unit and the selling price is $1,500. A new customer sends
an order of 400 units, for which the company has installed capacity to produce, but the
customer offers to pay $1,000.

The manager of the company hires you to determine with a marginal analysis if the
company should accept or reject the new order. Present the net income/loss this new
order would represent (10 pts).

Estado de resultados con informacion absorbente (cotos fijos y variables)

Ingreso pedido(400u*1000) 400,000
Costo de produccion (400u*1000) -400,000
Costo de operación 400u*10 -6,000
Perdida aparente del pedido -6,000

Estado de resultados con informacion marginal (cotos fijos y variables)

Ingreso pedido(400u*1000) 400,000
Costo variable de produccion (400u*700) -280,000
Costo variable de operación 400u*10 -4,000
Utilidad Marginal del Pedido 116,000

B. A company buys and sells with a profit 3 different products: Chairs, windows, and mirrors.
The preparation for the Income loss statement is in process, but the manager asked the
team to prepare a marginal analysis for each product to determine if the product should
be discontinued or not. Financial information now follows:

Chairs Windows Mirrors

Sales 100,000 150,000 50,000
COGS (97,000) (70,000) (15,000)
 Gross profit 3,000 80,000 35,000

Additionally, the team already computed the total fixed operational costs ($45,000) that as the
manager asked for compliance matters, should be allocated equally to the 3 products.
Additionally of the fixed expenses, the company entered a contract with a company that will help
to deliver the products as a new strategy to increase sells. The cost per delivery would be $10 and
the delivery schedule is following:

Chairs Windows Mirrors

# Of deliveries 500 1000 1000

Determine if all products should continue in the catalog of the Company with a marginal analysis
of each product. (15 pts).
I think the CHAIRS should not continue because the COGS almost is the same amount as the sales,
they only give 3,000 and they do not cover fixed expenses or shipping so we end up loosing, yes
maybe the other products can cover and have 2,000 more of profit, but still I think we can use that
money of production of chairs in selling and producing the other 2 products.
 INCLUYENDO SHIPPING COST
ANALSIS MARGINAL costos fijos y variables CHAIRS
ingreso pedido 100,000
costo de ventas -97,000
costo de operación 10*500 -5,000
utilidad -2,000

ANALSIS MARGINAL costos fijos y variables WINDOWS

ingreso pedido 150,000
costo de ventas -70,000
costo de operación 10*1000 -10,000
utilidad 70,000

ANALSIS MARGINAL costos fijos y variables mirrors

ingreso pedido 50,000
costo de ventas -15,000
costo de operación 10*10,000 -10,000
utilidad 25,000

We should discontinue chairs, the

difference of the profit is 2,000 but
the charis do not cover the fixed
costs and they have a very litte
contribution margin