Question

CompDesk, Inc., makes a single model of an ergonomic desk (with chair) for computer usage. The desk is manufactured in building 1. and the chair is manufactured in building 2 Monthly capacities and production levels are as follows. Building 1 (Desks) Building 2 (Chairs) Monthly capacity 400 509 Monthly production 400 400 The company will sell a desk only with a chair and can sell 500 desks per month. The units (desk with chair) sell for $315 each and have a variable cost of $130 each. Required: a. Is there a bottleneck at CompDesk in Building 1 or Building 2? b. CompDesk's production supervisors state they could increase building 1's capacity by 100 desks per month by producing desks on the weekend. Producing on the weekend would not affect the sales price. Variable cost per unit would increase by $30 for those produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $21,000 per month b-1. Calculate the differential operating profit (loss). b-2. Should CompDesk produce desks on the weekend? c. Independent of the situation in requirement (b), CompDesk could add additional equipment and workers to building 1, which would increase its capacity by 100 desks per month. This would not affect the sales price or variable cost per unit but would increase fixed costs by $15,500 per month c-1. Calculate the differential operating profit (loss). c-2. Should CompDesk add the additional equipment and workers to building 1?

Answer 1

Page no Ansoen 1 a) building 1 allo Explanation: Company will sell a desk only with a chair Qud can sell soo desk per month that means month and because bu buildings monthly Capacity is only yoo desiel which means hoo chaire desks could be produced however Lale can sell soo desks of chacord theel building Soo Chairs a (desil) is a bottleneck at Compdesk.inc Differential Revenue $315x100 - $31, 500 Differential cost? fined $ 21,000 Variable ($1304 305x100 IGOOO nat differenti al operating loga $5,500

ba) degil ol it iş suçulting in met operating loss Pagen @ no compdesk inc should not produce the = $5,500 Differential revenue $315 X 100 =$ 31,500 Differential Cost fixed $15, 500 Variable ($130 Jxico = 13,000 net operating profit $ 3000 ca Yeş, compdesk should add Equipment and Hosikerl to buildingi as it is resulting in met operating posfit. of $ 3000