The Vadar Company makes Light Sabers. Information about Light Sabers is as follows: direct materials 12 Direct
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The Vadar Company makes Light Sabers. Information about Light Sabers is as follows: | |||||||||
direct materials | 12 | ||||||||
Direct labor | 3 hours at $15 per hour | ||||||||
depreciation on machine | $40,000 | ||||||||
selling price of Saber | $89 | ||||||||
Currently making and selling 2567 sabers | factory capacity 4000 sabers per period. | ||||||||
Part 1: | determined | ||||||||
a) contribution margin ratio | |||||||||
b) break even in units | |||||||||
c) margin of safety in dollars | |||||||||
d) degree of operatin leverage | |||||||||
e) current profit/loss | |||||||||
Part 2: | Palpatine, the head of the marketing department, has proposed the following; | ||||||||
Cut the selling price to $85, spend $3000 on advertising. If this is done, Palpatine believes sales will increase by | |||||||||
800 units. Should they do it? | How much does income change if they make these changes? | ||||||||
Part 3: | GO BACK TO ORIGINAL DATA: | ||||||||
Luke, the head engineer is all excited about a new machine he saw on "Empire Shark Tank" this machine will | |||||||||
save 1.2 hours of labor per saber but will cost $22000 per period to rent. | |||||||||
Should they rent the new machine? | How much does income change if they get the new machine. | ||||||||
Part 4: | GO BACK TO THE ORIGINAL DATA | ||||||||
Darth Mol, supervisor of the factory has proposed the following; | |||||||||
spend $8 per unit for a switch which makes the light saber double sided. We can increase the selling price $12 per unit | |||||||||
Mol is convinced we will only lose 120 customers who won't purchase the superior light saber | |||||||||
Should they keep the original saber or make the new and improved light saber? | |||||||||
What is the impact on income if they go to the new saber? | |||||||||
EXTRA CREDIT: GO BACK TO THE ORIGINAL DATA (NO PARTIAL CREDIT) | 4 points | ||||||||
Leigh, who runs the St SOLO home for orphaned Wookies, has come to you about purchasing 600 light sabers to | |||||||||
give to their donors at their annual Cinco de Tatooine festival. They want the light sabers to be blue with the emblem of | |||||||||
the St. SOLO home on the handle. Vadar determines it will cost $0.30 per unit to paint them blue and it will cost Vadar $200 | |||||||||
to get the plate with the St. Solo home emblem. Once acquired, there is not additional cost to emblazen the handle with the emblem. | |||||||||
Vadar is willing to donate $400 to this orphanage; thus he is willing to lose $400 on this special order. | |||||||||
What price does Vadar charge per unit for this special order? |
Related Book For
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt
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