Units sold 80,000

Selling Price $ 54.00 $ 4,320,000

DM $ 6.50 $ 520,000
DL $ 8.00 $ 640,000
VMO $ 2.50 $ 200,000
FMO $ 7.00 $ 560,000 560000 total
Vsell $ 1.70 $ 136,000
Fsell $ 4.00 $ 320,000 320000 total
Total Cost/unit $ 29.70 $ 2,376,000

Net $ 1,944,000

Problem 1 Problem 2
Capacity to produce 100,000 units Cap 100,000 units
No increase in FMO Co wants to buy 20,000 units
Increase sales by 25% Pay import duties $2.70/unit
Increase Fsell by $110,000 Add $12,000 cost
Only selling costs $1.90/unit
sales $ 5,400,000
DM $ 650,000 Break even selling price
DL $ 800,000
VMO $ 250,000
FMO $ 560,000
Vsell $ 170,000
Fsell $ 430,000
Total Cost/unit $ 2,860,000
Net $ 2,540,000 $ 1,944,000 $ 596,000
at 80000 units dif
 Problem 5
co ofered to produce 80,000 uni
facilities would be idle
FMO reduce by 30%
Vsell would be 2/3 of current amo
what is avoidable cost per unit

DM
DL
VMO
FMO
Vsell
Fsell

Problem 3 Problem 4
Units 20000 500 units irregular, considered "seconds" strike occurs for 2 months
Selling Price ? Unit cost figure relevant for setting min selling price only operate at 25% of normal lev
or close down plant
DM $ 6.50 DM $ 6.50 sunk if closed…
DL $ 8.00 DL $ 8.00 sunk FMO would be at 30% of normal
VMO $ 2.50 VMO $ 2.50 sunk Fsell would reduce by 20% of nor
FMO FMO $ 7.00 sunk
Vsell Vsell $ 1.70
Fsell Fsell $ 4.00 sunk
Import $ 2.70 $ 29.70
Shipping $ 1.90
Fixed $ 0.60 $ 12,000
$ 22.20
co ofered to produce 80,000 units and ship to customers
facilities would be idle
FMO reduce by 30%
Vsell would be 2/3 of current amount
what is avoidable cost per unit

$ 6.50 avoid
$ 8.00 avoid
$ 2.50 avoid
$ 2.10 168000 avoid
$ 0.57 avoid $ 19.67
$ 4.00 X

a. forgone CM if close
strike occurs for 2 months sales units lost 3333
only operate at 25% of normal levels sales-varexp/unit $ 35.30
or close down plant $ (117,666.67)

FMO would be at 30% of normal level b. total avoidable fixed costs

Fsell would reduce by 20% of normal level FMO $ 65,333
64000 Fsell $ 10,667
$ 76,000

c. fin disad $ (41,666.67)

sell or process further Sell units 34000

selling price $ 2.30 per pound 16 ounce per unit

joint costs $ 1.70 DM $ 15
profit per pound $ 0.60 DL $ 8
VMO $ 3
processing $ 0.15 per unit FMO $ 7
filet selling price $ 4.00 per pound 6 ounce $ 1.50 Vsell $ 2
NY cut selling price $ 3.80 per pound 8 ounce $ 1.90 Fsell $ 6
Total Cost $ 41

Final sales value $ 3.40

Less sales value at split
of point $ 2.30 Problem 1
$ 1.10 expects to sell only 25,000 units
less processing $ 0.15 co ofered to purchase 9,000 units a
$ 0.95 Vsell cut by 75%
add fixed cost of $18,000

incremental revenue
incremental costs
DM
DL
VMO
FMO
Vsell
Fsell
AddFix
Total
Dif
 sell price $46

total
$ 510,000
$ 272,000
$ 102,000
$ 238,000 within range of 25,000 - 34,000
$ 68,000
$ 204,000
$ 1,394,000

Problem 2
ell only 25,000 units expects to sell only 25,000 units
o purchase 9,000 units at 16% discount $ 38.64 Army purchase 9000 units
Pay fixed fee $1.40/unit
ost of $18,000 Pay var and fixed production costs
no var selling exp
$ 347,760
incremental revenue $ 12,600
$ 135,000 incremental costs
$ 72,000 DM pay for
$ 27,000 DL pay for
VMO pay for
$ 4,500 FMO $ 63,000 will pay for, have to pay for an
Vsell avoid
$ 18,000 Fsell irrel
$ 256,500 Total
$ 91,260 Dif $ 75,600
 Problem 3
same sit as 2 but…
expects to sell 34,000 units
would have to give up sales of 9000 units

sales gain $ 12,600

fmo gain $ 63,000
cm margin lost $ (162,000)
$ (86,400)

will pay for, have to pay for anyways

develop winter product line to produce to buy 1 box
sell one product to test est box sales 110000
$ 1.45
sold to wholesales DM $ 4.00 DM $ 3.00
1 box of 24 tubes DL $ 2.40 DL $ 2.16
$9/box VMO $ 0.70 VMO $ 0.63
no add FMO FMO $ 0.90 FMO $ 0.90
$99,000 charge under FMO absorbed Total Cost $ 8.00 Total $ 8.14

Problem 1
if buy, how much avoid DM $ 1.00
DL, VMO reduced by 10% DL $ 0.24
DM reduced by 25% VMO $ 0.07
$ 1.31

Problem 2 Problem 3 Problem 4

Fin (dis)ad per box if buy tubes fin (dis)ad total max price willing to pay for box
110000 $ 1.31
buy price $ 1.45 $ (15,400)
savings $ 1.31
dif $ (0.14)
$ 1.45

Problem 5 Problem 6
revised sales volume from 110,000 units to 132,000 units data from 5
rent extra equip of $42,000 to make add 22,000 units accept order of any size
how many should buy and how many to make
what is fin (dis)ad in total of buying units
cost of making $ 172,920
extra equip $ 42,000
$ 214,920

cost to buy $ 191,400

fin ad $ 23,520
should buy
w many to make