Two products use a constrained machine hour resource. Product A has contribution margin $18 per unit and requires 0.6 machine hours per unit. Product B has contribution margin $14 per unit and requires 0.3 machine hours per unit. If machine hours are limited, which product provides the higher contribution margin per machine hour?
Read DetailsLarch Furniture can sell an unfinished coffee table for $85. If it is finished, it can be sold for $103. Additional finishing costs per table are: materials $4, labour $6, and variable overhead equal to 50% of incremental labour cost. Fixed costs do not change. What is the incremental impact on income per table if the company finishes the tables?
Read DetailsRiverbend Tools makes 25,000 handles per year. Per-unit variable costs: direct materials $3.20, direct labour $2.10, variable overhead $1.40. Fixed overhead is $90,000 per year. A supplier offers to sell the handles for $7.10 each. If Riverbend buys, 30% of fixed overhead can be avoided. What is the impact on annual operating income if Riverbend buys?
Read DetailsA company is considering replacing an old machine. If replaced, annual variable manufacturing costs will decrease from $154,000 to $118,000. The new machine costs $95,000. The old machine can be sold today for $7,000. Both machines have a remaining useful life of 4 years. Fixed costs do not change, and ignore time value of money. What is the total impact on operating income over the 4-year period if the machine is replaced?
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