ACT 360.1 Assignment1 Spring 2020
a) Taylor Furniture produces and sells specialty mattresses. Production is a machineintensive
process. Taylor’s variable costs are direct material costs, variable machining costs, and sales
commissions. Marion Taylor, the owner, is planning production for the coming year and
collects the following data:
Estimated
Demand
Selling
Price
Direct Material
Cost
Variable
Machining
(in Units) Per Unit Cost per Unit
Nealy 1,800 $ 3,000 $ 750 $ 600
Tersa 4,500 2,100 500 500
Pelta 39,000 800 100 200
Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on
each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed
manufacturing costs, total $8,750,000. Annual capacity is 50,000 machinehours, which is limited
by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture
holds negligible inventories to minimize business risk.
1. Calculate the machinehours required to satisfy the estimated demand for each type of
mattress. (3)
2. What is the contribution margin per unit earned from each type of mattress? (3)
3. Advise Marion Taylor about the most profitable production levels of the three products.
(4)
4. Suppose Taylor Furniture can lease additional machining capacity on an asneeded basis.
What is the maximum amount that Marion Taylor would be willing to pay for each hour
of additional machining capacity in the coming year? (3)
a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40%
chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity.
Each cookie has different variable costs:
ACT 360.1 Assignment1 Spring 2020
Types of Cookies Variable Cost Selling Price
Chocolate Chip $2.50 $6.50
Peanut Butter $2.00 $5.00
Sugar Cookies $1.50 $4.50
Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will
be $35,000. (7)
Total Marks 20ACT 360.1 Assignment1 Spring 2020
a) Taylor Furniture produces and sells specialty mattresses. Production is a machineintensive
process. Taylor’s variable costs are direct material costs, variable machining costs, and sales
commissions. Marion Taylor, the owner, is planning production for the coming year and
collects the following data:
Estimated
Demand
Selling
Price
Direct Material
Cost
Variable
Machining
(in Units) Per Unit Cost per Unit
Nealy 1,800 $ 3,000 $ 750 $ 600
Tersa 4,500 2,100 500 500
Pelta 39,000 800 100 200
Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on
each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed
manufacturing costs, total $8,750,000. Annual capacity is 50,000 machinehours, which is limited
by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture
holds negligible inventories to minimize business risk.
1. Calculate the machinehours required to satisfy the estimated demand for each type of
mattress. (3)
2. What is the contribution margin per unit earned from each type of mattress? (3)
3. Advise Marion Taylor about the most profitable production levels of the three products.
(4)
4. Suppose Taylor Furniture can lease additional machining capacity on an asneeded basis.
What is the maximum amount that Marion Taylor would be willing to pay for each hour
of additional machining capacity in the coming year? (3)
a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40%
chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity.
Each cookie has different variable costs:
ACT 360.1 Assignment1 Spring 2020
Types of Cookies Variable Cost Selling Price
Chocolate Chip $2.50 $6.50
Peanut Butter $2.00 $5.00
Sugar Cookies $1.50 $4.50
Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will
be $35,000. (7)
Total Marks 20ACT 360.1 Assignment1 Spring 2020
a) Taylor Furniture produces and sells specialty mattresses. Production is a machineintensive
process. Taylor’s variable costs are direct material costs, variable machining costs, and sales
commissions. Marion Taylor, the owner, is planning production for the coming year and
collects the following data:
Estimated
Demand
Selling
Price
Direct Material
Cost
Variable
Machining
(in Units) Per Unit Cost per Unit
Nealy 1,800 $ 3,000 $ 750 $ 600
Tersa 4,500 2,100 500 500
Pelta 39,000 800 100 200
Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on
each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed
manufacturing costs, total $8,750,000. Annual capacity is 50,000 machinehours, which is limited
by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture
holds negligible inventories to minimize business risk.
1. Calculate the machinehours required to satisfy the estimated demand for each type of
mattress. (3)
2. What is the contribution margin per unit earned from each type of mattress? (3)
3. Advise Marion Taylor about the most profitable production levels of the three products.
(4)
4. Suppose Taylor Furniture can lease additional machining capacity on an asneeded basis.
What is the maximum amount that Marion Taylor would be willing to pay for each hour
of additional machining capacity in the coming year? (3)
a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40%
chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity.
Each cookie has different variable costs:
ACT 360.1 Assignment1 Spring 2020
Types of Cookies Variable Cost Selling Price
Chocolate Chip $2.50 $6.50
Peanut Butter $2.00 $5.00
Sugar Cookies $1.50 $4.50
Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will
be $35,000. (7)
Total Marks 20ACT 360.1 Assignment1 Spring 2020
a) Taylor Furniture produces and sells specialty mattresses. Production is a machineintensive
process. Taylor’s variable costs are direct material costs, variable machining costs, and sales
commissions. Marion Taylor, the owner, is planning production for the coming year and
collects the following data:
Estimated
Demand
Selling
Price
Direct Material
Cost
Variable
Machining
(in Units) Per Unit Cost per Unit
Nealy 1,800 $ 3,000 $ 750 $ 600
Tersa 4,500 2,100 500 500
Pelta 39,000 800 100 200
Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on
each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed
manufacturing costs, total $8,750,000. Annual capacity is 50,000 machinehours, which is limited
by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture
holds negligible inventories to minimize business risk.
1. Calculate the machinehours required to satisfy the estimated demand for each type of
mattress. (3)
2. What is the contribution margin per unit earned from each type of mattress? (3)
3. Advise Marion Taylor about the most profitable production levels of the three products.
(4)
4. Suppose Taylor Furniture can lease additional machining capacity on an asneeded basis.
What is the maximum amount that Marion Taylor would be willing to pay for each hour
of additional machining capacity in the coming year? (3)
a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40%
chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity.
Each cookie has different variable costs:
ACT 360.1 Assignment1 Spring 2020
Types of Cookies Variable Cost Selling Price
Chocolate Chip $2.50 $6.50
Peanut Butter $2.00 $5.00
Sugar Cookies $1.50 $4.50
Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will
be $35,000. (7)
Total Marks 20ACT 360.1 Assignment1 Spring 2020
a) Taylor Furniture produces and sells specialty mattresses. Production is a machineintensive
process. Taylor’s variable costs are direct material costs, variable machining costs, and sales
commissions. Marion Taylor, the owner, is planning production for the coming year and
collects the following data:
Estimated
Demand
Selling
Price
Direct Material
Cost
Variable
Machining
(in Units) Per Unit Cost per Unit
Nealy 1,800 $ 3,000 $ 750 $ 600
Tersa 4,500 2,100 500 500
Pelta 39,000 800 100 200
Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on
each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed
manufacturing costs, total $8,750,000. Annual capacity is 50,000 machinehours, which is limited
by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture
holds negligible inventories to minimize business risk.
1. Calculate the machinehours required to satisfy the estimated demand for each type of
mattress. (3)
2. What is the contribution margin per unit earned from each type of mattress? (3)
3. Advise Marion Taylor about the most profitable production levels of the three products.
(4)
4. Suppose Taylor Furniture can lease additional machining capacity on an asneeded basis.
What is the maximum amount that Marion Taylor would be willing to pay for each hour
of additional machining capacity in the coming year? (3)
a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40%
chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity.
Each cookie has different variable costs:
ACT 360.1 Assignment1 Spring 2020
Types of Cookies Variable Cost Selling Price
Chocolate Chip $2.50 $6.50
Peanut Butter $2.00 $5.00
Sugar Cookies $1.50 $4.50
Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will
be $35,000. (7)
Total Marks 20
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