Ajax Corporation has entered into a contract to build a new tooling machine for Beta Machinery, Inc.
The project started several months back, and the most recent (June) Monthly Cost Summary is shown
below. Some of the table entries are missing, but the following additional information has been provided
through other channels:
o You can assume that the 100% overhead rate is fixed over the period of performance
o The snapshot in the report below has been taken as of month-end, June 30
o The 80/20 sharing ratio indicates that the customer (Beta) will pay 80% of any costs above
the target and up to the ceiling cost. Likewise, 80% of any cost savings below the target will
go back to Beta.
o The new PV has been revised from the original released PV and now serves as the current
plan of record.
o The ceiling price is based on cost (i.e., before adding in profit)
Based on the New Revised PV, how much profit can Ajax expect to make on this project?
a. 120,000
b. 324,000
c. 420,000
d. 300,000
2. (** refers to previous question **) Looking only at direct costs, comparing current month data to
cumulative data shows that
a. The CV is getting worse: -10.3% cumulative to -13.8% current-month
b. The CV is getting better: +$10,800 cumulative to +$53,100 current-month
c. The SV is getting worse: +$6,300 cumulative to -$23,300 current-month
d. The SV is getting better: -5.28% cumulative to 8.54% current-month
3. (** refers to previous question **) How much profit/loss would Ajax experience if the final burdened
cost for the program turned out to be $3,150,000?
a. $50,000 loss
b. $170,000 profit
c. $150,000 loss
d. $50,000 profit