the problem 7-02

q_pa7-1_and_others.xls

just use the information given in the problem 7-02 slide with the numbers rather worrying about the book part.

PA07-01

PA07-02

PA7-4

PA

0

7-01

P.

0

Incremental revenue
Incremental variable cost

0

Student Name:

Class:

Problem 07-01

MOHAVE C

OR

Requirement 1:

Incremental revenue

Incremental variable cost

Incremental profit

Requirement 2:

Requirement 3:

Incremental loss

Requirement 4:

IF the company is running at full capacity the idifferent price will be its total cost of $13.

Given PA07-01

Special order units

Special order unit sales price

Given Data PA07-01:
MOHAVE CORP.
	Special order units	1,500
	Special order unit sales price	$ 1	1.00
Production information:
		Direct materials	$ 5.00
		Direct labor					2.00
	Variable manufacturing overhead	3.50
	Fixed manufacturing overhead		2.50
Total cost	$ 13.00
Regular sales price		$ 19.00
Additional Information for Requirement 3:
2,000
$ 9.00

PA07-02

Student Name:
Class:

MOHAVE CORP.
Requirement 1:

0

Requirement 2:
Requirement 3:
Relevant cost of making
Relevant cost of buying
Differential cost of making versus buying Making

0

OR

Relevant cost of making
Relevant cost of buying
Differential cost of making versus buying Making
0 Try again!

Problem 07-02
		Relevant cost of making
		Relevant cost of buying
		Differential cost of making versus buying			Making
Correct!
	Try again!

Use the drop-down list to indicate whether the numbers favor Making or Buying the product.
Use the drop-down list to indicate whether the numbers favor Making or Buying the product.
Use the drop-down list to indicate whether the numbers favor Making or Buying the product.

Given PA07-02

MOHAVE CORP.

Direct materials

Direct labor 2.00

Variable manufacturing overhead 1.00
Fixed manufacturing overhead 2.00

Given Data PA07-02:
Outsourced units	8,000
Outsourced unit production cost	$ 6.00
In-house production information:
$ 3.00
Total cost per unit		$ 8.00
Annual profit generated by alternative
use of space.	$ 10,000

PA7-4

-or-Process

10,000.00

$ 8.00 $ 19.00

Direct materials

Direct labor

2.50

2.00 2.00

Sell

Incremental revenue

Given: Estimated Demand (Units)

Sell Process Further Net Income Increase (Decrease)
Incremental revenue $ 80,000

Incremental cost
Net impact on profit

Chapter 7, Problem Set A, Problem 4 – Analyzing		Sell
Further Decision
	Given:	Rosa Umbrella	Decorated Umbrella
	Estimated Demand (Units)		10,000.00
Estimated Sales Price
Estimated cost per unit
$ 2.50	$ 5.50
1.50	4.00
Variable mfg. overhead	0.50
Fixed mfg. overhead
Unit manufacturing cost	$ 6.50	$ 14.00
Add’l development cost	$ 10,000.00
Required:
Req. 1		Process Further		Net Income Increase (Decrease)
	$ 80,000	$ 190,000.00	$ 110,000.00
	Incremental cost
	Net impact on profit
Req. 2	Yes the decorative should be added as it will create additional profit of $25000
Req. 3
8,000.00
$ 152,000.00	$ 72,000.00
Still the decorative may be added as it will generate excess profit of $15000, instead of $25000.