Audit Management at Price
Autor: wong joyce • March 4, 2015 • Essay • 5,045 Words (21 Pages) • 1,078 Views
Q. 2 (a)
Cruiser - LX
=1,800 x (600/200) = 5,400 hours
Cruiser - EX
=2,400 x (500/200) = 6,000 hours
Boater - LX
=4,500 x (500/200) = 11,250 hours
Boater - EX
=4,200 x (400/200) = 8,400 hours
Canoe Star
=39,000 x (200/200) = 39,000 hours
Q. 2(b)
Cruiser–LX Cruiser–EX Boater–LX Boater–EX Canoe–Star
$ $ $ $ $
Sales 5,400,000 5,760,000 9,450,000 8,400,000 31,200,000
Less: Variable costs
Sales Commissions(10%) 270,000 288,000 472,500 420,000 3,120,000
Direct Materials 1,350,000 1,560,000 2,250,000 2,100,000 3,900,000
Variable Machining 1,080,000 1,200,000 2,250,000 1,680,000 7,800,000
Variable manufacturing
Overhead 270,000 300,000 562,500 420,000 1,950,000
Contribution Margin(CM) 2,430,000 2,412,000 3,915,000 3,780,000 14,430,000
CM / unit $1,350 $1,005 $870 $900 $370
Q. 2(c)
Cruiser–LX Cruiser–EX Boater–LX Boater–EX Canoe–Star
$ $ $ $ $
CM / unit 1,350 1,005 870 900 370
Machine hours / unit 3 2.5 2.5 2 1
CM / Machine hour 450 402 348 450 370
Annual capacity = 60,000 machine hours (given)
Cruiser–LX Cruiser–EX Boater–LX Boater–EX Canoe–Star
Priority 1st 2nd 4th 1st 3rd
Machine hours 5,400hours 6,000hours 4,800hours 4,800hours 39,000hours
Most profitable
production levels 1,800units 2,400units 1,920units 4,200units 39,000units
Q. 2(d)
The optimal product mix in Q. 2(c) leaves 2,580 units (4500-1920) of Boater - EX unfilled.
These remaining units of Boater - EX require 6,450 machine hours (2, 580 units x 2.5 MH per unit). The maximum price Taylor is willing to pay for extra machine hours is $348, which is the unit contribution per machine hour for additional units of Boater – EX. That is, total cost per machine-hour for these units will be $348 + $200 (variable cost per machine-hour) = $548 per machine-hour.
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