Please remember that this type of problem does not generally require extensive computations. If you are finding yourself doing lots of work, please try to step back and think carefully about what you really need to do.

Problem 1. Geppettos Workshop is a toy manufacturing firm. It makes all different kinds of wooden toys, which are sold to retailers all over Canada. One of the most popular toys is a wooden puzzle with all the letters of the alphabet. The puzzle generally sells for $300. The standard cost card for the puzzle follows:

DM (2.1 board feet of wood @ $25 per linear foot) $52.50

DL (.25 hour @ $25/hour) 6.25

VOH (3 MH @ 1.5/hour) 4.50

FOH (3 MH @ 25.50/hour) 76.50

TOTAL COST $139.75

Due to the worldwide economic slowdown, Geppettos has not been producing at its normal full capacity, which is 450,000 MH. For the upcoming month, the budget will be based on an expected 325,000 MH.

A potential customer from Bribane has approached Geppettos about buying 40,000 puzzles. The customer would require that some elements of the puzzle be modified in order to better appeal to its target market. Most of the design changes would not entail increased costs. However, the client wants one modification that would require DL time to be doubled. The client is offering to pay $100 per puzzle if the puzzles can be delivered by the end of the upcoming month.

Compute the impact on net income of accepting the offer.

Problem 2. Naturally Pretty is a privately owned nursery that operates in Sedona, Arizona. The firm has three product lines. Bushes is the most recent addition and has been underperforming expectations. Contribution format income statements for the products for the most recent month follow. Common costs of $50,000 which cannot be reasonably allocated to the products consist primarily of administrative costs.

Variable costs include the cost to acquire the seeds, as well as potting soil and pots to get the plants started in life. Salaries are for the gardeners who care for the grown plants, advertising is done for each product line in order to carefully target the appropriate market, fertilizer is to keep the plants healthy while they await adoption and land is an allocation of the lease payments on the area that the firm occupies.

What would be the impact on the net income of the firm as a whole if it decides to drop bushes as a product line?

Problem 3. Time to Live By makes custom-made sundials. Two months ago, the Thane of Sapphire Fief ordered a sundial to commemorate the birth of her 10^th child. The sundial, as ordered, was made of a rare granite mined near Banff. Huge sapphires shaped like fanciful griffins adorned the rim and the numerals are made of diamonds and rubies. The center was made of the purest gold. Due to some political unrest, Thane and her family are now in hiding. It is not expected that she will ever be able to take possession of (or pay for) the sundial. The cost of the sundial was:

DM $200,000

DL 30,000

VOH 5,000

FOH 15,000

Overhead is applied on the basis of direct labor hours.

Time to Live By has estimated that only 25% of the value of the gems and other material from the sundial can be recovered since they were cut into such unusual shapes.

The firm plans to offer the sundial at an auction next week. The cost to transport the sundial to the auction is $150. The auction house takes a 2% cut of the selling price.

What is the lowest price Time to Live should accept for the sundial?

Hi please provide me with a step-by-step solution for this relevant cost module exercise - highly appreciate it, will give you a rating if it is accurate. I would like to learn how it's done. Thank you so much!

Sales VC Grasses 430,000 210,000 220,000 Cacti 467,000 280,200 186,800 Bushes 125,000 55,000 70,000 CM FC Salaries Advertising Fertilizer Land Total Fixed Costs Segment Margin 75,000 25,000 8,000 10,000 118,000 102,000 47,000 30,000 2,000 25,000 104,000 82,800 25,000 35,000 14,000 30,000 104,000 (34,000)