Computer plans to classify manufacturing activities
Exercise 1? Assume the Trumpet Bagels Company has the following information available about their fleet miles and operating costs for its service department:
YEAR Fleet Miles Operating Costs
2015 395,000 $415,000
2016 405,000 $420,000
Using the high-low method, develop a cost-estimating equation for total annual operating costs.
? Angel Computer plans to classify manufacturing activities. List the four categories of activities and provide an example of each activity level.
? C2-29 – page 60 of the text.
? Supply the missing data in each independent case for Jennifer Associates
Case A Case B Case C Case D Case E
Unit sales 500 200 ? ? ?
Sales revenue $20,000 ? ? $75,000 $35,000
Variable cost per unit $35 $2.5 $17.50 ? ?
Contribution Margin ? $350 ? ? $17,500
Fixed costs $5,500 ? $65,000 ? ?
Operating income ? -$1,400 ? ? ?
Unit contribution margin ? ? ? $4 $5
Break-even point (units) ? ? 5,000 12,500 ?
Margin of Safety ? ? 4,000 12,500 2000
? Chandler Manufacturing Company currently buys 25,000 units of a part used to manufacture its product at $69 per unit. The supplier recently informed the
company’s management that a 20 percent increase will take effect next year. Chandler has some additional space and could produce the units for the following per-unit
costs (based on 25,000 units):
Direct materials $30
Direct labor $25
Variable manufacturing overhead $25
If Chandler purchases the units from the supplier, Chandler can rent out the plant for $45,000 per year. Should Chandler Company buy the part externally or make it
internally? Use differential analysis to support your answer.
? GTO Mfg., Inc. manufactures a single product (A) with the following full unit costs at a volume of 2,000 units:
Direct materials $ 900
Direct labor 360
Manufacturing overhead * 600
Selling expenses (50% variable) 300
Administrative expenses ** 280
Total per unit $2,440
*Note that per unit manufacturing overhead costs include $840,000 fixed costs
**Note that per unit administrative expenses include $500,000 fixed costs.
A company recently approached GTO Mfg.’s management about buying 350 units of product A. GTO Mfg. currently sells its product to dealers for $2,600 per unit.
Capacity is sufficient to produce the extra 350 units. No selling expenses would be incurred on the special order.
What is the minimum price GTO Mfg. should charge just to break even on the special order?