2 3 Q Inc. makes two products (A and B) in a single factory. Per unit costs and other data are as follows: 4 6 9 $ Product A Product B 1,500 1,000 2,000 2,500 $ 60 $ 70 13 $ 16 $ 15 $ 20 $ 7 $ 3 $ 6 $ 7 $ 15 $ 5 Monthly sales volume Monthly production capacity Sales price per unit Variable direct materials per unit Variable direct labor per unit Variable manufacturing overhead per unit Variable selling costs per unit Common fixed costs (allocated) per unit 10 11 12 13 14 15 L12-2 (1 point) Compute the financial advantage/(disadvantage) of adding a new Product C, with unit selling price of $50, variable costs of $35 per 16 unit, and no incremental, traceable fixed costs. Expected sales for Product is 300 units. Adding Product C would decrease Product A sales by 20%. 17 Provide one NONFINANCIAL reason why the Company should NOT add Product C. 18 19 20 21 22 23 24 25 26 L012-3 (1 point) Compute the financial advantage/(disadvantage) of outsourcing production of Product B. An outside supplier would charge the 27 Company $45 per unit. Provide one NONFINANCIAL reason why the Company should NOT outsource Product B. 28 29 30 31 32 33 34 35 36 L012-4 (1 point) Compute the financial advantage/disadvantage of accepting a special order from a new customer for 700 units of Product A. This 37 customer is willing to pay $75 per unit. There would be no variable selling costs for this order, and no effect on the Company's total aount of fixed 38 costs except for additonal, traceable fixed costs of $3,000. 39 40 41 42 43 LO12-4 (1 point) Compute the financial advantage/disadvantage of accepting a special order from a new customer for 700 units of Product A. This customer is willing to pay $75 per unit. There would be no variable selling costs for this order, and no effect on the Company's total aount of fixed costs except for additonal, traceable fixed costs of $3,000. LO12-1,2,5 % point each) Indicate whether each item below is True or False, assuming all else are held constant. The original cost of production machinery is relevant in the decision to keep or replace it. The most profitable use of a constrained resource is to utilize it to produce the product that delivers the highest contribution margin. Only the incremental costs are relevant to setting a price to sell discontinued products. Future costs that do not differ between the alternatives in a decision are avoidable costs. L012-2 (1 point) Briefly describe what 'death spiral' means in the context of the decision to keep or discontinue a product line. Make sure to discuss the relevance of contributio margin and/or fixed costs