The Delmar Beverage Co. produces a premium root beer that is sold throughout its chain of...

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Answer 1

Answer #1

a.

	Per Gallon
Raw materials	3.06
Direct labor	1.67
Variable overhead	1.61
Distribution cost	1.52

Total relevant costs per gallon	$ 7.86

b. Daily increase in operating income: $777.48

Sales price per gallon	9.00
Less: Variable costs per gallon
Raw materials	3.06
Direct labor	1.67
Variable overhead	1.61
Distribution cost	1.52
Total variable costs	7.86
Contribution per gallon	1.14
Number of gallons sold per day	682
Contribution per day	$ 777.48

c-1.

	Per Gallon
Current sales		9.00
Less variable costs:
Raw materials	3.06
Direct labor	1.67
Variable overhead	1.61
Distribution cost	1.52
Fixed overhead [(1593 x $2.03)/2276]	1.42	9.28
Net income (loss)		-0.28

c-2. Daily decrease in operating income: 682 x $0.28 = $190.96

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Answer 2

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