The attached troop list by type unit, "BLACKLIST" Operations, contains an allocation of type units, adjusted to availability in the Western Pacific for the months of August and September 1945 for u...
Full description
1. The material material used used to produce produce the new product product is highly highly special specialized. ized. A manufacturer of this material is offering to sell it at P8 per unit to the company. Oldcastle is currently manufacturing the material with the following costs: Material cost (per unit !irect Materials !irect $a%or 'aria%le manufacturing oerhead )i*ed manufacturing oerhead
P".## &.## &.## 1.##
Assuming that all fi*ed costs related to the material will %e saed if the company %ought it from the manufacturer+ should should Oldcastle %uy or continue to ma,e the materialOldcastle should %uy the material. The total manufacturing cost that would %e incurred will %e a greater amount from the %uying price. To get the total manufacturing costs+ add all the direct materials+ direct la%or and manufacturing oerhead costs. All releant costs will %e included. t was stated that all of its fi*ed manufacturing oerhead will %e saed if the company accepted the offer to %uy+ hence it could %e concluded that these costs are classified as tracea%le+ not common+ meaning that there are no irreleant costs that need to %e added in %uying.
Make Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead Total Cost per unit
Buy
Php ".## & .# # & .# #
/ / /
1 .# #
/
Php 10.00
Php 8.00
Ta,ing Ta,ing eerything into account+ it would %e %eneficial for the company compan y to %uy the said highly specialized material+ for it would decrease the cost to Php 8.##+ giing them a saings or net adantage of Php &.## per unit %ought.
&. !uring !uring the first first year of operat operations+ ions+ the the company Oldcas Oldcastle tle determin determined ed that their their plant capacity is not enough to cater to the demand of the new product %ecause most of their capacity is used to manufacture an old product. !etails of the old product are as follows: Manufacturing cost
The old product is %eing sold for P1## per unit. To produce the old product+ the company needs to allot hours per unit while to produce the new product+ the company needs to allot 8 hours per unit. Assuming an unlimited demand for %oth products+ which product should the company produce first-
$elling !rice Variable Costs Contribution Margin "o% of hrs needed per unit CM per hour
ld !roduct Php 100.00 (49.00) Php 51.00 /4
"e# !roduct Php 170.00 (35.00) Php 135.00 /8
!hp &'%()
!hp &*%+()
2elling price of the new product is greater than the old one+ %ut comparing these two would neer %e the %est %asis for there were different costs for each ,ind. 3ien the situation that on the first year+ the old product needs hours while the new product needs 8 hours+ it could %e seen that production in four hours is greatly %eneficial than producing in eight hours+ assuming that all other factors remain the same. 4eertheless+ the case was different+ since the new product has a relatiely greater amount in contri%ution margin. 3reater contri%ution margin means that the company will %e profita%le in producing the said product. 2ince the demand is unlimited+ %asing the answer in the num%er of hours seems the logical thing to do. All things considered+ it is %est for the company to produce the new product first+ rather than the old one. The contri%ution margin of the old product (1&.5"+ is lower to the new one6s margin (17.85".
