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Home / Questions / Berringer Enterprises manufactures 10 product lines The following information is

Berringer Enterprises manufactures 10 product lines The following information is

Berringer Enterprises manufactures 10 product lines. The following information is available for one of these product lines:
 

 

Sales revenue

$ 50,000

 

Variable costs

35,000

 

Contribution margin

15,000

 

Fixed costs

18,000

 

Net income

$(3,000)

 

 

 


The company’s controller is considering dropping the line because it is unprofitable. The controller believes that if the line is dropped, overall company profits are guaranteed to increase. However, the managerial accountant says, “That is not necessarily always the case.” Do you agree or disagree with the accountant? Why or why not? 

 

62. Morris Inc. manufactures two products: Widgets and Gizmos. Widgets have a contribution margin per unit of $30 and require 2 hours of direct labor while Gizmos have a contribution margin per unit of $39 and require 3 hours of direct labor.

A.

In the short-run, how should the company choose which product to produce or sell first if direct labor hours are a constraint?

B.

Assuming there is sufficient demand for each of these products, which of the above products should the company maximize production of first? Show calculations to support your answer.

 

 

 

63. Describe the theory of constraints. In doing so, define bottlenecks and throughput

64. Assuming there is sufficient customer demand either way, how does a company decide whether to sell a product “as is” or to process it further? When should it be processed further? 

65. A local skating rink charges each person $5 to skate and another $3 for each skate rental. The rink has determined that on a daily basis, when 100 tickets are sold, the costs per skater are $.50 for variable costs and $1 for fixed overhead costs. The rink has the capacity for up to 175 skaters per day. A local kid’s day camp has asked the rink to allow up to 35 children to skate for $2.50 each on July 15. This price would include the cost of a skate rental. During July, the rink averages 100 skaters per day.

Required:
 

A.

List two qualitative factors that should be considered by the rink before accepting the special order?

B.

What are the total relevant costs of accepting the special order?

C.

From a quantitative basis, should they accept the special order? By what amount will the rink’s net income increase or decrease if they accept the special order?

Jan 09 2020 View more View Less

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