PROBLEM 1Cost Concepts & Allocations PART ACLASSIFYING COSTS: EduBB is a company that manufactures personalized basketballs for educational institutions. Below is a list of the companys costs the dollar amount in parentheses is the total 2023 cost. Indicate whether each cost is VARIABLE or FIXED. VARIABLE or FIXED? Cost of utilities at manufacturing plant ($20,000).* Cost of utilities at corporate headquarters ($1,225).* Cost of advertising ($45,000). Cost of raw materials ($750,000). Cost of packaging materials ($20,000). Depreciation on manufacturing equipment ($150,000). Depreciation on headquarters furniture and fixtures ($30,000). Hourly wages paid to line workers at plant ($850,000).** Hourly wages paid to administrative staff ($210,000).** Salary paid to production manager at plant ($150,000).** Salary paid to CEO ($500,000).** Shipping costs paid to UPS for order delivery ($20,000).*** * Utility charges are solely based on usage (i.e., no flat-fee component). ** Company can adjust hours worked by line workers and administrative staff based on the number of orders. Production manager and CEO are paid a yearly salary. *** Shipping charges are solely based on weight of items shipped. PART BCALCULATING & USING PRE-DETERMINED OVERHEAD RATE: EduBB pools overhead costs together into one cost pool. Included in this cost pool are (1) the salary paid to the plant production manager ($150,000), (2) depreciation on manufacturing equipment ($150,000), and (3) cost of utilities at the manufacturing plant ($20,000). The cost driver used to allocate overhead is machine hours; the company estimates that there will be 20,000 total machine hours in 2023. EduBBs 2023 pre-determined overhead rate = $ per machine hour During 2023, DePaul University places an order with EduBB for 400 custom DePaul basketballs. The direct materials cost for this order is $3,200 and the direct labor cost for this order is $2,200. It takes 20 machine hours to complete the job. Total OVERHEAD costs EduBB allocates to the DePaul job = $ EduBBs cost per basketball for the DePaul job = $ PROBLEM 2Cost-Volume-Profit (CVP) Analysis SafeDoor Corporation produces security doors for retail stores. SafeDoor currently sells its newest door for $1,700. For each door, the company spends approximately $560 in the materials costs and $140 in labor costs. Fixed costs related the doors production are approximately $480,000 (specifically, $300,000 annual depreciation on manufacturing equipment, $125,000 annual advertising, and $55,000 fixed managerial labor costs). a. How many doors does SafeDoor need to sell in 2023 to break even? doors b. How many doors does SafeDoor need to sell in 2023 to earn a profit of $5,000,000? doors c. SafeDoors best guess is that they will sell 5,000 doors in 2023. If that estimate is correct, what is SafeDoors expected 2023 profit? $ d. Assume the following 2023 baseline levels: Selling Price = $1,700 per door & Units Sold = 5,000 doors. Evaluate the following two pricing possibilities relative to this baseline. SafeDoor estimates that if they reduce their selling price by 10% in 2023, they will sell 20% more doors. What is their expected profit if they reduce the selling price? $ SafeDoor estimates that if they instead increase their selling price by 10% in 2023, they will sell 15% fewer doors. What is their expected profit if they increase their selling price? $ These analyses suggest that a selling price of $ per door maximizes expected 2023 profit. e. SafeDoor estimates that its variable costs will remain the same in 2024 but its fixed costs will increase by 12.5%. SafeDoor wants to increase its selling price just enough to absorb these increased fixed costs. If SafeDoor wants to earn the same profit in 2023 and 2024 and believes they will sell 5,000 doors in both years, what does the per door selling price need to be in 2024 to pass the increased fixed costs along to customers? Assume that the selling price was $1,700 in 2023