T-Mobile 8:49 PM * 67%- Done 3 of 20 6 General Matress (GM) Company sells matres
ID: 2517319 • Letter: T
Question
T-Mobile 8:49 PM * 67%- Done 3 of 20 6 General Matress (GM) Company sells matresses at a regular price of $800. The total cost per uni $700, which consists of $200 direct labor per unit, $350 direct materials per unit, $100 fixed overhead per unit, and 550 variable A hosel chain offered to bay 1,000 matresses from GMa discounted price of $650. This is a one-time special onder (ie, a short-serm decision), and GM has pare capucity to accommodate this order. IGM accepts the special order, GM's profit will overhead per unit A decrease by $150,000 B. decrease by $50,000 C remain the same 600 Deo 4D increase by $50,000 E. increase by $150,000 7. Which of the following are resonable ways to deal with excess demand? Use all available capacity to make the product with the highest CM per unit of capacity Increase prices C Increase advertising DAll of the above E A and B only make component X in-house at a cost of $16 per unit, which comsists of $2 direct labor per unit,$7 materials per unit, 56 fixed overhead per unit, and $1 variable overhead per unit You noed 1,000 units of X per month. An outside supplier has offered to sell component X to you at 56 per unit if you outsouroe the production of X to the supplier, how much will your profit change in the short term? A.De rease by SIO,000 per month B. Decrease by $4,000 per month C No change by 54,000 per month Increase by S10,000 per month 9 You budgoted to use 2 pounds of materials per unit at a budgeted cost of $100 per pound. Budgeted prodaction and sales volume was 5,000 units. Actual production and sales volume was 6,000 units, and you used a total of 11,900 pounds of materials at an actual cost of $102 per pound. The input price and input Input Price A Favorable B. Favorable Input Eficiency Favorable Seas Unfavorable vrable Unfaverable E. Not emough information-need to know the "flexible" and "as-if badget amounts 10. Company found that customer X is unprofitable. What are reasonable ways to deal with this customer? ABC A Charge the customer a higher price per unit (assume that you can charge different customers different prices for the same product or service) B. Limit the number of free technical-support calls per cusaoener C. lfnothing else works, ?1re"the customer D. A and B oely EDA, B, and CExplanation / Answer
6) As the decision is a short term decosion (or a special order) and there is sufficient excess capacity, only relevant cost will be charged to the special order (i.e. only variable manufacturing cost is relevant, fixed overhead is irrelevant).
Special Order Price = $650 per unit
Total Variable manufacturing cost per unit = Direct Materials+Direct Labor+Variable Overhead
= $350+$200+$50 = $600
Contribution per unit = Special Order Price - Variable manufacturing Cost
= $650 - $600 = $50 per unit
Increase in Profit from special order = Contribution per unit*Units in Special Order
= $50 per unit*1,000 units = $50,000
Therefore the GM's profit will increase by $50,000 if GM accepts the special order. Hence the correct option is D) increase by $50,000.
7) The reasonable ways to deal with excess demand includes use all available capacaity to make the product with the higher contribution margin per unit of capacity and increase prices. Therefore the correct answer is Both A and B. Hence the correct option is E) A and B only.
8) Relevant cost of making component X = Direct Materials+Direct Labor+Variable Overhead
= $7+$2+$1 = $10 per unit
Price offered by Supplier = $6 per unit
Increase in Profit if supplier's offer is accepted = ($10 - $6)*1,000 units
= $4,000
Therefore the profit will increase by $4,000 if the production of X is outsourced to the supplier. Hence the correct option is D) Increase by $4,000 per month.
9) Standard Qty for Actual Production = 6,000 units*2 pounds = 12,000 pounds
Standard Price = $100 per pound
Material Price Variance = (Std Price - Actual Price)*Actual Qty
= ($100-$102)*11,900 pounds = ($23,800) Unfavorable
Material Efficiency Variance = (Std Qty - Actual Qty)*Std Price
= (12,000 - 11,900)*$100 = $10,000 Favorable
The input price variance is Unfavorable and Input efficience variance is Favorable. Therefore the correct option is c) Unfavorable Favorable.
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