PROBLEM 4-INCREMENTAL ANALYSIS Hickman Manufacturing produces Product A in batch

Question

PROBLEM 4-INCREMENTAL ANALYSIS Hickman Manufacturing produces Product A in batches of 4,000 gallons at $.90 per gallon. Product A can be sold without further processing for $1.20 per gallon. Product A can be processed further to yield Product B, which can be sold for $1.85 per gallon. Product B requires additional processing costs at $1,650 per batch A. Instructions Compute the incremental income or loss from further production of one batch of Product B B. Brooks Manufacturers produces can openers. For the first six months of 2018, the company reported the following operating results while operating at 80% of plant capacity. Sales $4,000,000 Variable Cost per unit $4.90 Fixed Cost per unit $5.25

Explanation / Answer

ans 1 Incremental revenue after further processing $2,600 (1.85-1.2)*4000 Less: incremental cost $1,650 Incremantal Income $950 ans 2 Incremental revenue from special order(20000*7.5) $150,000 Less: Relevant cost Less: Relevant cost'Variable cost (4.9*20000) $98,000 Less: Shipping cost $7,000 Incremental profit $45,000 There are four different question. I have answered the first two ans c Southern Division Eliminate Sales -300000 Variable cost 234000 Saving in Fixed cost 34400 (86000*40%) Decrease in profit -31600 currently decrease in profit 20000 Net decrease in profit -11600 Hemce southern division should not be eliminated ans d Make Buy Differential Direct material 70000 0 70000 Direct labor 30000 0 30000 Variable manufacturing overhead 20000 0 20000 Purcahse 144000 -144000 (6000*24) Contribution margin of other product 30000 30000 Total 120000 114000 6000 Its better to buy

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