Question

peed rating 2018. Eam Inc. wilsol 90.000 units of Decision Making 1. Company Exam, I writy ma tures to products VAM and AMG. Demand for VAM has been growing during the past few years, and s VAM. Given that the speed demand of AMC 20.000 units in 2019 The production costs for each product is detailed below VAM AMC Price $12 5196 Cost per unit 543 562 Laber VOH 112 FOH Later is dand Fred Overhead are shared by the two products One of the company's mandats has placed in order for 10,000 units of VM at a reduced price of $110 per unt, not included in the 90,000 emotion. Given that the company is working at full capacity company pred special order the production of AMC should be reduced to 15.000 units. There would be to change in horor fred overhead coi a. Should the company compris s onder and only manufacture 15.000 units of AMC? b. The company could source 8.000 units of AMC from an eternal ppler. The cost per unit would be $160 per unt. Should the company cept the order and source 5,000 from the deal supplier 2. The manager of company Testing Co has proposed a new payment method to his employees, based on commissions of 4% of Cortion Mwin Currently, the company prysh ed for $250.000 and selling commission of sales. The proposed payment method would increasing commissions of a wedding f a st 100.000 Expected sales for the second semester of 2019 are 1.000.000, and the contribuon margin is 40% a. Should the company adopt the new payment method in order to reduce cost? b. From which sales level would be better to keep the current payment method company opposed Production of a new line of 3. Cookies and se v ypes of cookies Chocolate Chip Vila Supreme, and Fancy Cookie The production manager Morr o Bone Womation regarding this new product is shown below. • per kopen of cookies • Adde d 150.000 • Saling pro p erklegram com w h e r e the would drop by 2.000 og androvides a combina of 31 per a Sho w ice the new working? b. The r eforew product in was , would your own change? L.Due to competition, w e of Everyday used a 20reduction of the swing 'ABC product in the price of Cand According to the comes the production was comple, the volume of "ABC would go from 5.000 to 1000 would not change e d to the product Wate r Co. Chorder decor

Answer 1

Ans-1- AMC (A) statement of Ranking Particulars VAM 132 Price t) variable cost 43 Matthiae 12 Variable OH 55 Total variable Cost Contribution (A) (B) ㅋㅋ Ranking y company accepts the special order a) Particulars Amount Contribution thom 10000 770000 units of vam (10000 X 877) Contribution fost from 5000 575,000 units of Amc (5,000 8 115) Contribution gained $195,000 So, company should accept the special order. Statement of Comparative cost particulars Anout Contribution 975000 Sales (5000 x $195) W outsource cost (5,000 x 160) 800.000 Profit $17500 So the company should accept the special order and outsoure for Amc Total Profit = 195000 + 178000 = $370,000 we will not consider labour and fixed overhead as they would not change due to special order. Anda particulars salts A) statement of Comparison Method i Method 2 4 రాజ్యాంగం 4000,000 2,320,000 2,320,00 80,000 200,000 11.08 4;000,000) 157.0f you ow) ti variable cast Selling Committiin

Total Variable conte) Contribution (A) B 2,400,000 2120,000 it fixed lost 250,000 100,oo Profit 2150,oo 2020,000 As propt is more in method 1, company should NOT adopt new method. WNI- In 2019 sales = 4000,000 contribution margin = 40%. contributiow - hoov, ovo X 40% = 1600000 (there selling commissum @ 2) of sales is included in variable cost Total variable colt= sales - Contribution 3 400 goyo - 16ovoro 2 2,400, Variable cast etter than selling commissim = 2400,000 - 80,000 = 2320,000 150,000 Aus 3- a) Statement of comparison sales of chostbread cookies - 16,000 x 60) 360,000 () variable colt (6,000 x 30) 180, on Contribution 180,00 & foed cost Profit 30,000 y contribution lost due to loss of sales of fancy dovo (2000 & 1o.) lo,ยาว As there b increase in prefit of $10,000 so accept the launch the new cookie. - 6 y price of new cookie is $55 statement of comparism sales (6,000 x 55) 330.000 I variable cost (6,000 X 30) 180,00 Contribution 150,00 Es fixed cost 150,00 Bonit - Contribution test (2000x1o) (20,000) Dopit loss 20,000 As there is loss of $20,000 to we should not launch neco wonic if it selling price is $55. 0

Amy- 0) 28,000 statement of comparison (After discount) Particulars amount Increase fon seles (too o 15x0.8 84.000 (-) Variable Cast (7000 x 8) 56000 Contribution on toro units - statement of comparism (Beyore discount) Particulars Amout sales of soos @ 15 31950 G Variable cost (500088) yoooo Contribution on 5000 unito. 3500 As there is non contribution on sale of 5000 units without discount so we should not accept price reduction. Minimum Price Let new price ben' (tooo x K) - (Tous x 8) = (5000x15) - (560088) 7000 - 56000 = 35,000 นาง % = l ) z 13 so minimum price, when the company will be indifferent 1813. 6)