Rare Terra, Inc. produces two bateries - high capacity and low capacity. Management woukd like to...

  

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Rare Terra, Inc. produces two bateries - high capacity and low capacity. Management woukd like to know the optimal sales mix based on the following data: Raw materials consist of casings and lithium ion cells. Lithium-ion cells cost $50 each. There are 30 cells in the HighCap battery and only 12 in the LowCap. The casings for the LowCap cost $500 each, and the casings for the HighCap cost $800 each. It takes 25 hours of Direct labor to assemble a HighCap and 20 hours to assemble a LowCap. The standard labor rate is $40 per hour. The main constraint on production is the size of the facility, which is 8.000 square feet, of which 6,000 is dedicated to HighCap production and 2.000 to LowCap. The company prefers to manufacture HighCap because it is used in Teslas and other high-profile cars. Fixed costs are currently as follows: Fixed costs per month Sales Salary Total $12,000 $90,000 Selling. General, and Administrative Production facility rent $10,000 $112,000 The company currently sells 60 HighCap batteries per month and 100 LowCap. HighCap sell for SB,000 each, and LowCap sell for $4,000. 1. Create a current contribution margin income statement with allocated fixed costs. Allocate Sales Salary and SG&A using units sold, and Production Facility Rent using square footage. Production facility HighCap LowCap Total Square teet Allocation rate HighCap LowCap Total Current Sales Volume Allocation rate Variable Costs per unit Casings HighCap LowCap Lithium-lon cells Labor per assembled battery Fixed costs per month Sales Salary Selling, General, and Administrative Production facility rent HighCap LowCap Iotal allocated based on units sold allocated based on units sold allocated basod on square footage Rare Terra, Inc. Product Mix CVP Analysis (month) HighCap LowCap Total Sales Variable costs Contribution Margin Fixed costs Operating income 2. How many units of HighCap could the company produce if it shifted all production space to that product ine? a. Current production space Current production Production space per unit square feet units b. Total production space Production space per unit Total capacity square feet units 3. How many units of LowCap could the company produce if it shifted all production space to that product line? a. Current production space Current production Production space per unit square feet units b. Total production space Production space per unit Total capacity square feet units 4. Calculate the contribution margin per unit for the constraint (production facility space): HighCap LowCap Units produced Square feet of space Units produced per SF Contribution margin/unit Contribution margin/SF Сарacity Total CM at Capacity 5. Create a contribution margin income statement for Rare Terra, Inc. if it shifts all of its production to LowCap, assuming there is enough market demand to absorb the extra production: Rare Terra, Inc. Product Mix CVP Analysis (month) Units 400 HighCap LowCap Total Sales Variable costs Contribution Margin Fixed costs Operating income Rare Terra, Inc. produces two bateries - high capacity and low capacity. Management woukd like to know the optimal sales mix based on the following data: Raw materials consist of casings and lithium ion cells. Lithium-ion cells cost $50 each. There are 30 cells in the HighCap battery and only 12 in the LowCap. The casings for the LowCap cost $500 each, and the casings for the HighCap cost $800 each. It takes 25 hours of Direct labor to assemble a HighCap and 20 hours to assemble a LowCap. The standard labor rate is $40 per hour. The main constraint on production is the size of the facility, which is 8.000 square feet, of which 6,000 is dedicated to HighCap production and 2.000 to LowCap. The company prefers to manufacture HighCap because it is used in Teslas and other high-profile cars. Fixed costs are currently as follows: Fixed costs per month Sales Salary Total $12,000 $90,000 Selling. General, and Administrative Production facility rent $10,000 $112,000 The company currently sells 60 HighCap batteries per month and 100 LowCap. HighCap sell for SB,000 each, and LowCap sell for $4,000. 1. Create a current contribution margin income statement with allocated fixed costs. Allocate Sales Salary and SG&A using units sold, and Production Facility Rent using square footage. Production facility HighCap LowCap Total Square teet Allocation rate HighCap LowCap Total Current Sales Volume Allocation rate Variable Costs per unit Casings HighCap LowCap Lithium-lon cells Labor per assembled battery Fixed costs per month Sales Salary Selling, General, and Administrative Production facility rent HighCap LowCap Iotal allocated based on units sold allocated based on units sold allocated basod on square footage Rare Terra, Inc. Product Mix CVP Analysis (month) HighCap LowCap Total Sales Variable costs Contribution Margin Fixed costs Operating income 2. How many units of HighCap could the company produce if it shifted all production space to that product ine? a. Current production space Current production Production space per unit square feet units b. Total production space Production space per unit Total capacity square feet units 3. How many units of LowCap could the company produce if it shifted all production space to that product line? a. Current production space Current production Production space per unit square feet units b. Total production space Production space per unit Total capacity square feet units 4. Calculate the contribution margin per unit for the constraint (production facility space): HighCap LowCap Units produced Square feet of space Units produced per SF Contribution margin/unit Contribution margin/SF Сарacity Total CM at Capacity 5. Create a contribution margin income statement for Rare Terra, Inc. if it shifts all of its production to LowCap, assuming there is enough market demand to absorb the extra production: Rare Terra, Inc. Product Mix CVP Analysis (month) Units 400 HighCap LowCap Total Sales Variable costs Contribution Margin Fixed costs Operating income

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