Question

5-8 plz help show work so I can fully understand

CHAPTER END REVIEW Best Sleep Company manufactures two mattress toppers called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha $ 40 Beta $ 24 34 Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit 33 30 33 $199 $ 171 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

Answer 1

Answer with full working is given below

5 Incremental gain on Customer order Incremental Sales $4,256,000 Less: Incremental cost Direct material $1,120,000 Direct Labor $1,064,000 Variable manufacturing cost $700,000 Variable selling expense $840,000 Total Incremental cost $3,724,000 Incremental contribution $532,000 A Loss on Sales to Regular customer Sales $2,730,000 Less: Direct material $520,000 Direct Labor $494,000 Variable manufacturing cost $325,000 Variable selling expense $390,000 Total Variable Cost $1,729,000 Contribution lost $1,001,000 B Net Financial Disadvantage - $469,000 A-B $18,576,000 Sales Less: Direct material Direct Labor Variable manufacturing cost Variable selling expense Total Variable Cost $2,592,000 $3,672,000 $2,484,000 $2,808,000 $11,556,000 Contribution Traceable fixed cost $7,020,000 $4,608,000 Net Profit $2,412,000 Financial disadvantage of discontinuing Beta line is $2,412,000 $9,976,000 Sales Less: Direct material Direct Labor Variable manufacturing cost Variable selling expense Total Variable Cost $1,392,000 $1,972,000 $1,334,000 $1,508,000 $6,206,000 Contribution Traceable fixed cost $3,770,000 $4,608,000 Net Loss -$838,000 Financial advantage of discontinuing Beta line is $838,000 8 Existing Sales Alpha $20,580,000 Beta $13,416,000 Sales Less: Direct material Direct Labor Variable manufacturing cost Variable selling expense Total Variable Cost $3,920,000 $3,724,000 $2,450,000 $2,940,000 $13,034,000 $1,872,000 $2,652,000 $1,794,000 $2,028,000 $8,346,000 Contribution Fixed Cost Net Profit $7,546,000 $4,224,000 $3,322,000 $5,070,000 $4,608,000 $462,000 Total Profit $3,784,000 Alpha $22,890,000 New Sales Sales ( 98,000 + 11,000) * $210 Less: Direct material Direct Labor Variable manufacturing cost Variable selling expense Total Variable Cost $4,360,000 $4,142,000 $2,725,000 $3,270,000 $14,497,000 Contribution Fixed Cost Net Profit $8,393,000 $4,224,000 $4,169,000 Increase in Net profit $385,000