Questions -
1. Leo Luken Corporation produces automatic cat feeders. The total cost per unit of producing a feeder is $42 as detailed below:
Direct Materials: $12.50
Direct Labor: $16.00
Variable Manufacturing Overhead: $8.20
Fixed Manufacturing Overhead: $5.30
The normal selling price of a feeder is $68. The company's capacity is 10,000 feeders per month but currently only 8,500 feeders are being produced. A special order has been received from the Humane Society of Greater Kansas City whereby the customer asked if Leo Lion Corporation would produce 1,500 feeders. The Humane Society is only able to pay $35 per feeder. Variable Manufacturing Overhead costs of $.80 could be avoided on the special order. Should the special order be accepted? What is the impact to operating income? Support your answer numerically.
2. Leo Luken Corporation produces two types of cat beds, regular and deluxe. The company can sell all of whatever type it produces but is limited to 3,000 machine hours per month. Leo can produce 2 regular cat beds per hour or one deluxe bed per hour. Regular cat beds sell for $12 and have total variable costs of $7.40. Deluxe cat beds sell for $36 and have total variable costs of $28. Fixed costs re $22,000 regardless of the type of cat bed produced. What is the most profitable sales mix for the company? The company can sell a maximum of 6,000 regular cat beds and 2,500 deluxe cat beds. With this additional fact what is the maximum operating income that can be earned?