Question

- ry u l UUC using the presellegue 1.1. 35. Target Costing. Table Manufacturing, Inc., makes wood tables for commercial use. The marketing department has identified a market for a specific table that the company does not currently produce, and it expects that each table could be sold for $2.000. Management requires a profit of 40 percent of the selling price Required: Determine the highest cost (target cost management would be willing to accept to produce this product. 36. Constrained Resources. Armor Enterprises produces three types of products, value, modest, and extreme. A machine-hour bottleneck has been identified in the production department. Armor would like to optimize its use of machine hours by producing the two most profitable products. Information for each product type follows. Production Machine Hours Price Variable Cost Value 2.00 $1,200 Modest 1.00 800 Extreme 1.25 300 Required: a. Calculate the contribution margin per unit of constrained resource for each product. b. Which two products would Armor Enterprises prefer to produce and sell to optimize the use of machine hours in the production department? 37. Qualitative Factors. For each of the following independent scenarios identify at least one qualitative factor that should be considered before making the decision. dhe duty, a. A company sells three types of chainsaws (light duty, medium duty, and heavy duty) of which of which are profitable. The company faces a labor-hour bottleneck and plans to eliminate the light duty product because it has the lowest contribution margin perlabor hour. b. A company plans to drop an unprofitable customer A maker of farm equipment would like to shut down its manufacturing facility and outsource production,

Answer 1

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Answer 35	Amount $	Note
Sell price	2,000.00	A
Profit %	40%	B
Profit $	800.00	C=A*B
Target cost price	1,200.00	D=A-C
Answer 36
Answer a	Value	Modest	Extreme	Note
Sell price	1,200.00	800.00	300.00
Less: Variable costs	900.00	700.00	180.00
Contribution per unit	300.00	100.00	120.00	E
Answer b	Value	Modest	Extreme	Note
Contribution per unit	300.00	100.00	120.00	See E
Machine hours	2.00	1.00	1.25	F
Contribution per machine hour	150.00	100.00	96.00	G=E/F
Rank	1	2	3

If machine hour is constraint then Armor should produce that product which has highest contribution per hour. So it should chose Value and Modest.

Answer 37
Answer a	If light duty product is dropped then company should consider that it will not impact the operational efficiency.
Answer b	Before dropping customer the company should consider that it will not impact the financial efficiency.
Answer c	Before dropping production and outsourcing the company should consider that it will not impact the overall profitability.