accounting homework problem 495125

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Part III
ABC company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and ABC does not have the necessary labor force for both jobs. Indeed, it will be necessary to hire a new supervisor if either job is accepted. Furthermore, additional insurance will be required if either job is accepted. The revenue and costs associated with each job follow.

Cost Category	Job A		Job B
Contract price	$	808,000	$	691,000
Unit-level materials		244,800		225,150
Unit-level labor		250,450		306,600
Unit-level overhead		18,100		14,400
Supervisor s salary		115,670		115,670
Rental equipment costs		25,800		28,400
Depreciation on tools (zero market value)		20,900		20,900
Allocated portion of companywide facility-sustaining costs		11,000		8,900
Insurance cost for job		17,600		17,600

Required:


Revenue (14,000 units $14.0)	$	196,000
Unit-level materials costs (14,000 units $1.70)		(23,800	)
Unit-level labor costs (14,000 units $.60)		(8,400	)
Unit-level overhead costs (14,000 $.40)		(5,600	)
Unit-level selling expenses (14,000 $.20)		(2,800	)

Contribution margin		155,400
Skin cream production supervisor s salary		(57,000	)
Allocated portion of facility-level costs		(13,900	)
Product-level advertising cost		(46,000	)

Contribution to companywide income	$	38,500

Required:

a.	Calculate the total avoidable costs.

b-1.

Calculate the total avoidable cost per unit.

b-2.	Should Seymour continue to make the product or buy it from the supplier?

c-1.	Suppose that Seymour is able to increase sales by 10,000 units (sales will increase to 24,000 units). Calculate the total avoidable costs.
c-2.	At this level of production, should Seymour make or buy the cream?

Attachments:

2220_group_di….docx

Calculate the contribution to profit from Job A and Job B.

Assume that ABC has decided to accept one of the two jobs. Recommend which job to accept?

Assume that Job A is no longer available. ABC s choice is to accept or reject Job B alone. Calculate the contribution to profit from Job B.

Based on your answer to requirement b-1, recommend whether to accept or reject Job B.

Part IV
Seymour Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Seymour produces a relatively small amount (14,000 units) of the cream and is considering the purchase of the product from an outside supplier for $5.70 each. If Seymour purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Seymour s accountant constructed the following profitability analysis.