Problem 1: Rayburn's Tents makes backpacking tents. It has the capacity to produce 10,000 tents per year and currently is producing and selling 7,000 tents. Normal selling price for a tent is $470. Unit-level costs are $100 for direct materials, $200 for direct labor, and $25 for other manufacturing costs. Facility-level costs of $80 are allocated to each tent. Rayburn's has received a special order for 1,500 tents at $340 each.
Required: Should Rayburn's accept the special order? Support your answer with appropriate computations.
Problem 2: Hart Company currently produces a component that it uses in making some of its products. Hart has calculated the following costs for making the part:
Unit-level costs
Materials $20
Labor 28
Overhead 2
Allocated facility level costs 10
Total cost $60
Hart is considering outsourcing the component. A supplier has offered to sell the component to Hart for $54 each. Hart needs 10,000 units each year.
Required: Should Hart outsource the component? Support your answer with appropriate computations.
Problem 3:
Don's Game Store sells computer and other electronic games. The store has budgeted sales for January 2008 as indicated in the following table. The company expects an 8 percent increase in sales for the month of February and a 5 percent increase for March.
Sales January February March
cash sales $20,000 ? ?
Sales on account 40,000 ? ?
Total budgeted sales $60,000 ? ?
Required:
A) Complete the sales budget by filling in the missing amounts.