Question

help with calculations

Instructions: The assignment should be a series of recommendations and calculations addressing the requested items below. This will be done in a professional memo format with complete sentences that explain your process and include essential supporting calculations and/or tables. I would expect the memo to be no less than one full page and no more than four pages. The goal is two-fold: the proper answers AND the appropriate presentation of the answers. You will submit this via D2L as you did the Solo projects. Chris Eastus has just opened the Eastus Company. The company makes four products: A1 A1 $84 8 lbs. B2 $20 2 lbs. 03 $56 5 lbs. 04 $70 3 lbs Selling price Direct material per unit Direct labor and Var OVH costs per unit Fixed costs $10,000/month $28 $5 $27 $40 All four products use the same direct material, Bistide, which costs $3 per pound. Due to restrictions by the vendor, Eastus Company can buy only 5000 pounds of Bistide each month. Demand for the Eastus Company products far exceeds the Bistide available. Due to contractual obligations, Eastus Company must produce at least 200 units of each of the four products each month. You just began work as the controller and Chris Eastus has asked you to recommend, via memorandum, how many units of each product Eastus Company should produce each month, why you recommend this mix, and what the firms' operating income would be for a typical month with this recommended product mix. Secondly, Chris Eastus has a lead on an additional source for more Bistide - she may be able to obtain an additional 1000 pounds per month from a second vendor. In the same memo, tell her the maximum price per pound you recommend she should pay for this additional 1000 pounds of Bistide and why. Explain which product(s) (and how many) she should make with it and how much total extra she could net for each $0.01 less than your recommended maximum price per pound she is able to negotiate. Note: these are not products that are restricted to integers, you may have partial products.

Answer 1

A.

Calculation of contribution eaRned from each product
Product	A1	B2	C3	D4
Selling price	84	20	56	70
Less:
Material @ $ 3 per Lbs	24	6	15	9
Labour	28	5	27	40
Contribution	32	9	14	21
Contribution per pound of Bistide	4	4.5	2.8	7
Rankings	3	2	4	1
Minimum Production	200	200	200	666.6666667
Total raw material required	1600	400	1000	2000
Calculation of operating income	6400	1800	2800	14000
Less: Fixed Costs
Profits

B.

The highest contribution earned per Bistide is $ 7
The second highest contribution earned per Bistide is $ 4.5
Price per Bistide (7-4.5)	2.5
Highest contribution is from product D4 and therefore same is recommended to be produced
Additional production	333.33
Material cost	7.5
Labour Cost	40
Additional Contribution	7499.925
Recommended maximum price	PRODUCTION Qty( D4)	Total variable cost	Contribution
2.5	333.33	47.5	7499.925
2.49	333.33	47.47	7509.9249
2.48	333.33	47.44	7519.9248
2.47	333.33	47.41	7529.9247