Question

Concord Corporation produces corn chips. The cost of one batch is below: Direct materials Direct labor Variable overhead FixeSheffield Corp. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product iNelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio

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Answer #1

Correct Answer:

Requirement 1:

$ 12 per batch

Working:

Differential Analysis

Make

Buy

Direct material

$                 16.00

Direct labor

$                 11.00

Variable Overhead

$                   9.00

Outside purchase price

$                    24.00

Total Cost

$                 36.00

$                    24.00

Therefore: 36 – 24 = $ 12

Requirement 2:

Sell before assembly, the company will be better off by $ 3 per unit

Working:

Profit before assembly – profit after assembling product

Unassembled product (Sales price – total cost) – assembled product (Sales price – total cost)

(52-24) – (64-(24+15)

= 28 – (64- 39)

= 28 – 25

=$ 3

Requirement 3:

$ 500,000 + .60X = X

Does not express break-even point

End of answer.

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