Question: Please help to solve these problems 1. Jacob Fabrics manufactures quality both towels at its highly automated plant. The plant has a production capacity of

 Please help to solve these problems 1. Jacob Fabrics manufactures quality

Please help to solve these problems

both towels at its highly automated plant. The plant has a productioncapacity of 48,000 towels each month. Current monthly production is 30,000 towels.

1. Jacob Fabrics manufactures quality both towels at its highly automated plant. The plant has a production capacity of 48,000 towels each month. Current monthly production is 30,000 towels. The manufacturing costs per unit consist of the following : Variable cost($) Fixed cost ($) Total cost ($) Direct materials 6.00 0 6.00 Direct manufacturing labour 0.50 1.5 2.00 Manufacturing overhead 1.00 3.00 4.00 Manufacturing costs 7.50 4.50 12.00 The marketing costs per unit are $7($5 of which is variable). As a result of a strike at its 1 existing towel supplier, a luxury hotel chain has offered to buy 5,000 towels from Jacob Fabrics at $11 per towel. No subsequent sales to this customer are anticipated. Fixed manufacturing costs are tied to the 48,000 towel production capacity. The acceptance of this special order is not expected to affect the selling price or the quantity of towels sold to regular customers. Should Jacob accept the hotel chain's offer?4. Tornado Company is considering replacing a metal cutting machine with a newer model. The new machine is more efficient than is the old machine, but it has a shorter overall life. Revenues from aircraft parts ($1.1 million per year) will be unaffected by the replacement decision. Summary data on existing (old) machine and the replacement (new) machine follow : Old existing machine New replacement machine Original cost $1,000,000 $600,000 Useful life 5 years 2 years Current age 3 years 0 years Remaining useful life 2 years 2 years Accumulated depreciation $600,000 Not acquired yet Book value $400,000 Not acquired yet Current disposal price (in cash) $40,000 Not acquired yet Terminal disposal price ( in cash 2 years | 0 $0 from now ) Annual operating costs (maintenance, $800,000 $460,000 energy, repairs, coolants, and so on) Tornado uses straight line depreciation. To focus on the main concept of relevance, ignore time value of money and income taxes. Should Tornado replace its existing machine

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