Q1) Myrna's Landscaping is a private company owned and operated by Myrna. It cuts lawns and weeds gardens. Myrna has found that she has greater success charging by the job rather than by the hour. She has collected the following data:
In a 40 hour week, and a four-week month, Myrna can work 160 hours.
Lawn Cutting Weeding
Myrna's charge per job $25.00 $25.00
Variable cost per job $20.00 $15.00
Average time per job 0.5 hours 1.25 hours
Monthly demand 200 125
How should Myrna allocate her time?
Q2) Erin of Ireland produces replicas of traditional Irish products. It's shillelagh division has reported the following:
Sales $1,000,000
Variable expenses 700,000
Contribution Margin 300,000
Fixed expenses
Salaries and wages $100,000
Insurance 60,000
Depreciation* 60,000
Advertising 100,000
Total Fixed Expenses 320.000
Net Operating Loss $(20,000)
*Two years remaining useful life, no salvage value, or current resale value.
If the division is dropped, the staff will be laid-off, with the exception of one person who will be assigned to another job. Her salary is $45,000. Should the division be dropped?
Q3) Goodguys Ltd. makes pens. Its per unit costs are given below:
Direct Materials $ 2.50
Direct Labour 1.50
Variable manufacturing overhead 1.00
Fixed traceable manufacturing overhead 1.50
Fixed common manufacturing overhead 5.00
Unit production cost $11.50
Goodguys Ltd. sells the pens for $20,00 each. A local school wants to give each student in its graduating class a pen this year with the school's name printed on it. The school is willing to pay $10,00 per pen for 100 pens. To put the school's name on the pen will require an additional cost of $.75 per pen. Goodguys Ltd. has excess capacity, and the pens could be made without affecting the fixed traceable manufacturing overhead. Should Goodguys Ltd. accept the offer?