Question 1:Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following monthly product-line income data: Product Total A B CSales $300,000 $150,000 $60,000 $90,000 Variable expenses 180,000 90,000 30,000 60,000 Contribution margin 120,000 60,000 30,000 30,000 Fixed expenses: Rent 15,000 7,500 3,000 4,500 Depreciation 18,000 9,000 3,600 5,400 Utilities 12,000 6,000 1,500 4,500 Supervisors' salaries 15,000 4,500 1,500 9,000 Maintenance 9,000 4,500 1,800 2,700 Administrative expenses 30,000 9,000 6,000 15,000 Total fixed expenses 99,000 40,500 17,400 41,100 Net operating income $21,000 $19,500 $12,600 ($11,100) The following additional information is available:• The factory rent of $4,500 assigned to Product C is avoidable if the product were dropped. • The company's total depreciation would not be affected by dropping C.• Eliminating Product C will reduce the monthly electricity bill from $4,500 to $2,400. The electricity bill is included in utilities expenses.• All supervisors' salaries are avoidable.• If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $9,000 to $6,000.• Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $9,000.Required: 1. Would you recommend the company discontinue Product C. Provide any analysis to determine your answer. Question 2:Foulds Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:Direct materials $ 7.25Direct labor 11.45Variable manufacturing overhead 1.65Fixed manufacturing overhead 6.00Unit product cost $ 26. 35An outside supplier has offered to sell the company all of these parts it needs for $23.25 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this product would be $21,450 per year.If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $4.60 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.Required:1. How much of the unit product cost of $26.35 is relevant in the decision of whether to make or buy the part?2. What is the total dollar advantage (disadvantage) of purchasing the part rather than making it?3. What is the maximum amount the company should be willing to pay an outside supplier per unit if the supplier commits to supplying all 10,000 units required each year? Question 3:Jumonville Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 84,000 units per month is as follows:Direct materials $ 31.90Direct labor 5.15Variable manufacturing overhead 2.30Fixed manufacturing overhead 13.30Variable selling & administrative expense 1.80Fixed selling & administrative expense 10.90Unit product cost $ 65.35The normal selling price of the produce is $68.05 per unit.An order has been received from an overseas customer of 2,400 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.85 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.Required:1. Suppose there is ample idle capacity to produce the units required by the overseas customer and the discounted price on the special order is $61.45 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?2. Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer (i.e. what amount would the company forgo if they accepted the special order)?3. Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 840 units for regular customers. What would be the minimum acceptable price per unit for the special order? Question 4:Holvey Company makes three products in a single facility. Data concerning these products follows: Products A B CSelling price per unit $ 122.50 $ 161.70 $ 150.30Direct materials 46.50 88.40 99.60Direct labor 37.45 49.00 25.90Variable manufacturing overhead 2.10 1.05 0.90Variable selling cost per unit 3.15 4.00 3.70Mixing minutes per unit 2.10 1.40 0.70Monthly demand in units 3,500 7,000 3,500The mixing machines are potentially the constraint in the production facility. A total of 13,000 minutes are available per month on these machines. Direct labor is a variable cost in this company.Required:1. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.)2. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.)3. How would your answer from (1) above change if direct labor is not considered a variable cost? Question 5:Marietta Company is investigating three different investment opportunities. Information on the three projects under study is given below: Project Number A B CInitial investment required 870,000 850,000 770,000Expected annual cash inflows 188,190 136,875 237,655Life of the project 6 years 8 years 4 yearsThe company uses a discount rate of 5% to assess all potential investment opportunities. Limited funds are available for investment, so the company can only accept one available project.Required:1. For each project, compute the following:a. Net present valueb. Internal rate of returnc. Project Profitabilityd. Payback Period2. Based on your analysis, which investment opportunity would you recommend to the company? Explain. Question 6:Comparative data on three companies in the same service industry are given below: Company Alpha Beta GammaSales $ 1,755,000 $ 978,000 GNet operating income 228,150 146,700 HAverage operating assets 975,000 D 1,420,000Margin A E 2.5%Turnover B F 0.80Return on investment (ROI) C 4.50% IRequired:1. What advantages are there to breaking down the ROI computation into two separate elements, margin and turnover?2. Calculate the missing information above, and comment on the relative performance of the three companies in as much detail as the data permits. Make specific recommendations about how to improve the ROI. Question 7:MacIntyre Fabrications has recently begun a continuous improvement campaign. As a consequence, there have been changes in operating procedures. Progress has been slow, particularly in trying to develop new performance measures for the factory.Management has been gathering the following data over the past four months: Month 1 2 3 4Quality control measures: Customer complaints as a percentage of units sold 1.0% 1.0% 1.0% 1.4% Warranty claims as a percentage of units sold 1.8% 1.8% 1.8% 1.8% Defects as a percentage of units sold 4.3% 3.9% 3.5% 3.0%Materiel control measures: Scrap as a percentage of total cost 3.0% 2.7% 2.8% 2.5%Machine performance measures: Percentage of machine availability 80% 79% 80% 80% Use as a percentage of availability 75% 76% 71% 71% Average setup time (hours) 2.3 2.3 2.3 2.3Delivery performance measures: Percentage of on-time deliveries 84% 85% 92% 94%The president has attended conferences at which the importance of throughput time, manufacturing cycle efficiency, and delivery cycle time were stressed, but no one at the company is sure how they are computed. The data to compute these measures have been gathered and appear below: Month 1 2 3 4Wait time per order before start of production, in days 17.0 15.2 12.4 9.0Inspection time per unit, in days 0.1 0.1 0.5 0.6Process time per unit, in days 0.5 0.5 0.5 0.5Queue time per unit, in days 5.4 5.5 5.4 5.5Move time per unit, in days 1.7 1.6 1.6 1.7 Required:1. For each month, compute the following operating performance measures:a. Throughput time.b. Manufacturing cycle efficiency (MCE).c. Delivery cycle time.2. Using the performance measures given and those you computed in (1) above, do the following:a. Identify areas where the company seems to be improving.b. Identify areas where the company seems to be deteriorating or stagnating.c. Explain why you think some specific areas are improving while others are not.