Exercises - Management Accounting Concepts and Techniques for Decision Making 16. The Call Company has an available 120 pieces of material M1 and 80 meters of material M2 to produce its products A and B: Product A Product B Unit Contribution Margin Required Materials: Material M1 Material M2 P3 P4 2 pieces 4 meters 5 pieces 2 meters REQUIRED: a. Objective function - involving maximization of the company's contribution margin. b. Non-negativity constraint for the decision variables c. Constraint function for Material M1 d. Constraint function for Material M2 e. Optimal product mix
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- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?The Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
- The Porsche Club of America sponsors driver education events that provide high-performance driving instruction on actual race tracks. Because safety is a primary consideration at such events, many owners elect to install roll bars in their cars. Deegan Industries manufactures two types of roll bars for Porsches. Model DRB is bolted to the car using existing holes in the car's frame. Model DRW is a heavier roll bar that must be welded to the car's frame. Model DRB requires 20 pounds of a special high alloy steel, 40 minutes of manufacturing time, and 60 minutes of assembly time. Model DRW requires 25 pounds of the special high alloy steel, 100 minutes of manufacturing time, and 40 minutes of assembly time. Deegan's steel supplier indicated that at most 38,000 pounds of the high-alloy steel will be avallable next quarter. In addition, Deegan estimates that 2,000 hours of manufacturing time and 1,800 hours of assembly time will be available next quarter. The profit contributions are $200…Due to COVID-19, Northface faced a shortage of "regular" manufacturing workers and asked its executives to work on the factory floor without any extra pay. What is a possible consequence? A. favorable materials quantity variance B. Favorable labor rate variance C. Unfavorable materials price variance D. unfavorable labor efficiency varianceDemand for stereo headphones and music players for joggers has caused Nina Industries to grow almost 50 percent over the past year. The number of joggers continues to expand, so Nina expects demand for headsets to also expand, because, as yet, no safety laws have been passed to prevent joggers from wearing them. Demand for the players for this year was as follows: MONTH DEMAND (UNITS) January 4,150 February 4,250 March 3,950 April 4,350 May 4,950 June 4,650 July 5,250 August 4,850 September 5,350 October 5,650 November 6,250 December 5,950 a. Using linear regression analysis, what would you estimate demand to be for each month next year? Using a spreadsheet, follow the general format in Exhibit 3.8. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. To be reasonably confident of meeting demand, Nina decides to use 3 standard errors of estimate for safety. How many additional units should be held to meet this…
- 3. Determine the optimal Q and TC given the following information: D = 3,000 liters Selling price per liter = $45 Ch = = 18% of the selling price Co = $130 Discount schedule: Quantity (liter) Discount <400 0% 400 to 600 1% 600 to 800 3% 800 or more 5% Show complete solution.Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at a predetermined transfer price. The assembly division's standard variable production cost per unit is $550. This division has spare capacity, and it could sell all its components to outside buyers at $680 per unit in a perfectly competitive market. Required: a) Determine a transfer price using the general rule b) How would the transfer price change if the assembly division had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transfer prices. How does this relate to the general transfer pricing rule?3(AL Jn 2020, Square-Nine Entrerprise has purchased 250,000 micro-chips for the first four months and 35% more on the remainder as a component in the production of its products. As much as 25% of the purchase is not used but instead stored in the warehouse. Each unit of the final product is sold in the market at a price of $18.99 per unit, and the storage cost is a total of $1.13 per unit. The cost price of the order is $5,500 for each delivery that takes three weeks. Calculate: 1) An annual optimal order quantity. 2) A total of number of orders placed in a year. 3) Time range between orders if the company operates for 49 weeks in a year 4) What are total units for reorder point? 5) Cost of Goods Sold.
- Q1) A retail. Store stocks two types of shirts A and B. These are packed in attractive cardboard boxes. During a week the store can sell a maximum of 400 shirts of type A and a maximum of 300 shirts of type B. The storage capacity, however, is limited to a maximum of 600 of both types combined. Type A shirt fetches a profit of SR 2/- per unit and type B a profit of SR. 5/- per unit. (b) Find the optimal solution (How many of each type) that store should stock per week to maximize the total profit. Use Graphical Method.An investment proposal will have annual fixed costs of $60,000, varial costs of $35 per unit of output, and revenue of $55 per unit of output. i) Determine the break-even quantity. ii) What volume of output will be necessary for an annual profit of $60,000Which of the following changes in cost-volume-profit factors will reduce the break-even point? Group of answer choices a. A decrease in total fixed cost d. An increase in total fixed cost b. A decrease in selling price c. An increase in unit variable cost In a contribution income statement Group of answer choices a. Costs are classified as to function b. Fixed and variable manufacturing costs are combined as one level item d. Fixed manufacturing costs are shown separately from variable manufacturing costs, but fixed and variable operating costs are combined as one line item c. Fixed costs are shown separately from variable cost