Reference no: EM131797033

1.Office Products produces three models of commercial shelving: the A, B, and C models. Data on operations and costs for the month are the following:

                                                           A               B            C             Total

Machine hours                                8,000         6,000       4,000           18,000

Direct labor hours                           6,000         6,000       4,000           16,000

Units produced                               1,000            500          250             1,750

Direct material costs                  $ 20,000   $  12,500     $ 7,500        $ 40,000

Direct labor costs                        129,000     100,000      71,000         300,000

Manufacturing overhead costs                                                             520,800

Total costs                                                                                            860,800

 Required: Compute the unit cost for each model, assuming Office Products uses:

(a) Direct labor hours to allocate overhead costs.

(b) Direct labor costs to allocate overhead costs.

(c) Machine hours to allocate overhead costs

2.The following information relates to a product produced by Martin Company.

Direct Materials       $ 50

Direct Labor               35

Variable Overhead     30

Fixed Overhead         40

Unit Cost                $155

Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Martin expects to produce only 800,000 units next year. The product normally sells for $180 each. A customer has offered to buy 60,000 units for $150 each. The customer will pay the transportation charge on the units purchased.

Required:

(a) Compute the effect on income if Martin accepts the special order.

(b) If Martin accepts the special order, how much could normal sales drop before all of the differential profits disappear?