Question

1A: A customer has requested that Lewelling Corporation fill a special order for 2,200 units of product S47 for $38 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $16.90:

Direct materials	$	4.60
Direct labor	$	4.00
Variable manufacturing overhead	$	1.70
Fixed manufacturing overhead	$	6.60
Unit product cost	$	16.90

Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product S47 that would increase the variable costs by $1.90 per unit and that would require an investment of $16,000.00 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:

Multiple Choice

$40,760

($15,700)

$16,200

($2,000)

1B: An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below:

		LN		JQ		RQ
Selling price per unit		$	161.88	$	350.41	$	446.71
Variable cost per unit		$	116.12	$	279.11	$	338.71
Minutes on the constraint		$	2.60	$	4.60	$	7.50

Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

LN, JQ, RQ

RQ, LN, JQ

RQ, JQ, LN

JQ, RQ, LN

Answer 1

1)
	Contribution on special order
	Selling price				38
	less:Variable cost
	direct materials			4.6
	Direct labor			4
	Variable oh (1.70+1.90)			3.6
	total variable cost				12.2
	Contribution per unit				25.8
	total contribution on special order 2200*25.8=					56760
	less special molds					-16,000
	Net financial advantage					40760	answer
2)					LN	JQ	RQ
	Selling price per unit				161.88	350.41	446.71
	less Variable cost per unit				-116.12	-279.11	-338.71
	contribution per unit				45.76	71.3	108
	minutes				2.6	4.6	7.5
	contribution per minute				17.6	15.5	14.4
	Ranking				1	2	3
	answer	LN,JQ,RQ