Question

Brenda’s Brakes manufactures three different product lines, Models X, Y, and Z. The following per unit data apply:

                                                                                    Model X        Model Y        Model Z

         Selling price                                                         $50                 $60                 $70

         Direct materials                                                        6                      6                      6

         Direct labour ($12 per hour)                                12                    18                    24

         Variable support costs ($4 per machine hour)   4                      6                      8

         Fixed costs                                                             10                    10                    10

Required:

If there are a limited number of direct labour hours available and demand exceeds the total direct labour hours available, in what order should the models be produced to maximize total contribution margin?

Problem 9

Beckstead Company makes a single product called a widget. The company normally produces and sells 80,000 widgets each year at a selling price of $40 per unit. The company’s unit cost at this level of activity is given below:

Direct materials	$ 9.50
Direct labor	10.00
Variable manufacturing overhead	2.80
Fixed manufacturing overhead	5.00	($400,000 total)
Variable selling expenses	1.70
Fixed selling expenses	4.50	($360,000 total)
Total cost per unit	$33.50

Required:

Assume that Beckstead Company has sufficient capacity to produce 100,000 widgets each year without any increase in fixed manufacturing overhead costs. The company could increase sales by 25% above the present 80,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Would the increased fixed selling expenses be justified?

Answer 1

8.

9.

Computation of Profit for 80000 units

Computation of profit for 25% increase in sales.

The increased fixed selling expenses be justified.