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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Problem 6 (Theory of Constraints, Throughput Contribution, Relevant
Costs)
The Zashi Corporation manufactures filing cabinets in two operations
machining and finishing. It provides the following information.
Machining
100,000 units
80,000 units
Finishing
80,000 units
80,000 units
Annual capacity
Annual production
Fixed operating costs (excluding direct
materials)
Fixed operating costs per unit produced
(P6,400,000 ÷ 80,000; P4,000,000
÷ 80,000)
P6,400,000
P4,000,000
P80 per unit
P50 per unit
Each cabinet sells for P720 and has direct materials costs of P320 incurred at
the start of the machining operation. Zashi has no other variable costs. Zashi
can sell whatever output it produces. The following requirements refer only
to the preceding data. There is no connection between the requirements.
Required:
1. Zashi is considering using some modern jigs and tools in the finishing
operation that would increase annual finishing output by 1,000 units. The
annual cost of these jigs and tool is P300,000. Should Zashi acquire these
tools? Show your calculations.
2. The production manager of the Machining Department has submitted a
proposal to do faster setups that would increase the annual capacity of the
Machining Department by 10,000 units and cost P50,000 per year. Should
Zashi implement the change? Show your calculations.
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- Required Information The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product Its average cost per unit for each product at this level of activity are given below. Beta $24 32 Direct materials Direct labor Variable manufacturing overhead Traceable fFixed manufacturing overhead Variable selling expenses Common fixed expenses %2442 42 34 31. Total cost per unit $173 607$ The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume that Cane normally produces and sells 59,000 Betas per year. What is the financial advantage (disadvantage) of iscontinuing the Beta product line? o search 近arrow_forward! Required information [The following information applies to the questions displayed below.] Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost Per Unit $ 6.30 $ 3.80 $ 1.50 $ 4.00 $ 3.30 $ 2.00 Contribution margin per unit $ 1.00 $ 0.50 13. If the selling price is $22.30 per unit, what is the contribution margin per unit? (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forward
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