Question

27. Gallery Corporation makes two products, footballs and baseballs. Additional information follows: Footballs Baseball Units Sales Variable costs Fixed costs Net income Yards of leather per unit Profit per unit Contribution margin per unit 2,000 $60,000 24,000 10.000 $26.000 123 $13.00 $18.00 2,500 $25,000 13,750 5.250 $ 6.000 0.30 $2.40 $4.50 Assume that Gallery is able to order an additional 2,500 yards of leather and wishes to maximize its income. Of the additional units it produces, at least 500 of each product are necessary for sales. Instructions How many units of each must be produced? 28. Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Instructions Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order. 29. Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks: Direct materials $100 Direct labor 140 Variable overhead 80 Fixed overhead (40% avoidable) 150 Instructions Prepare an incremental analysis which shows the effect of the make-or-buy decision.

Answer 1

			Footballs	Baseballs
	a	Contribution Margin Per Unit	$    18.00	$       4.50
	b	Yards of leather per unit	1.25	0.3
	c	contrbution margin per yard	$    14.40	$    15.00
		(a/b)
	d	Ranking	II	I
	From the above table it is clear that company need to give priority for production
	of Baseballs because it will give more contribution margin.
	However company need to be produced minimum 500 units of footballs
	500 Units Of Football will consume			625	Yards
	(500 units *1.25)
	Balance Yards (2500-625)			1875	yards
	Therefore , no of Baseballs to be produce			6250	Units
	(1875 yards /0.30 per yard)
	Therefore additional units must be produce
			Footballs	Baseballs
			500	6250
	( dear student in the question it was not given that whether we need to calculate
	only additional to be produce or overall units to be produced if question is how much
	total units to be produced answer will be as follws. It is advisiable to prefer above answer
	if it shows wrong then try below one)
	Total Units
			Footballs	Baseballs
			2500	8750