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1.Marshall Company currently pays an outside supplier $45 per unit for a part for one of its products. Marshall is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $15 per unit, direct labor of $24 per unit, and incremental overhead of $9 per unit. Method 2 for making the part would require direct materials of $15 per unit, direct labor of $6 per unit, and incremental overhead of $21 per unit. Required: (1) Compute the cost per unit for each alternative method of making the part. (2) Should Marshall Company make or buy the part? If Marshall makes the part, which production method should it use?

2. A company produces three different products that all require processing on the same machines. The company has only 27,000 machine hours available in each year. Production information for each product is:

	A	B	C
Sales price per	$ 20.00	$ 38.00	$ 35.00
Variable costs per unit	$ 12.00	$ 26.00	$ 17.00
Machine hours necessary to produce one unit	2.5	4.0	4.50

Required: (1) Determine the preferred sales mix if there are no market constraints on any of the products. (2) Determine the preferred sales mix if the demand is limited to 5,000 units for each product. (3) Determine the preferred sales mix if the demand is limited to 3,000 units for each product.

3. Luxury Linens reports the following segment (department) income results for the year.

	Department M	Department N	Department O	Department P	Department T	Total
Sales	$ 126,000	$ 70,000	$ 112,000	$ 84,000	$ 56,000	$ 448,000
Expenses
Avoidable	19,600	72,800	44,800	28,000	75,600	240,800
Unavoidable	103,600	25,200	8,400	58,800	19,600	215,600
Total expenses	123,200	98,000	53,200	86,800	95,200	456,400
Income (loss)	$ 2,800	$ (28,000)	$58,800	$ (2,800)	$ (39,200)	$ (8,400)

Required: (1) If the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be eliminated? (2) Compute the total increase in income if the departments with sales less than avoidable costs, as identified in part (1), are eliminated.

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