Evaluation of decision on outsourcing using sales mix decision.
Sunny Hazel, the manager of cyber web services must decide whether to hire a new employee or to outsource some of the web design work to Ky to, a freelance graphic designer. if she hires a new employee, she will pay $32 per design hour for the employee to work 600 hours and incur service overhead costs of $2 per design hour. If she outsources the work to ky to, she will pay $ 36 per design hour for 600 hours of work. She can also redirect the use of a computer and server to generate $ 4000 in additional revenue from web page maintenance work. should cyber web services hire a new designer or outsource the work to ky To?
Sales Mix Decision
EZ,Inc, manufactures two products that require both machine processing and labor operations. Although there is unlimited demand for both products, EZ could devote all its capacities to single product. Unit process, cost data and processing requirements are:
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Product E
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product Z
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Unit selling price
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$80
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$220
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Unit variable costs
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$40
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$90
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Machine hours per unit
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4
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1.4
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Labor hours per unit
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2
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6
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Next year the company will be limited to 160.000 machine hours and 120.000 labor hours. Fixed costs for the year are $ 1000000.
1. Computer the most profitable combination of products to be produced next year.
2. Prepare an income statement using the contribution margin format for the product volume computed in 1.
Sell or process further Decision
Six start pizza manufactures frozen pizzas and calzones and sells them for $ 4 each. Six star is currently considering a proposal to manufacture and sell fully prepared products. Management has gathered the following relevant information.
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Product
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sales revenue with no Additional processed
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sales revenue if processed further
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AdditionalProc
product costs
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Pizza
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$4
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$8
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$5
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Calzone
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$4
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$10
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$5
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Use incremental analysis to determine which products six star pizza should offer.