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1. Part-1 of 3

   Glocker Company makes three products in a single facility. These products have the following pricing, demand and cost structure for year 2021:

   Per Unit	Alpha	Gama	Beta
   Selling Price	$55.80	$54.60	$43.10
   Variable Cost	$27.90	$31.20	$21.20
   Yearly Demand (units)	2,000	1,200	3,000

   Fixed cost for the year is $450,000.

   Although the company is doing well, there is always shortage of labor. As a result, the company needs to prioritize its productions plans. The company's production team has supplied the following information.

   1 unit of Alpha requires 2 hours of labor, 1 unit of Gama requires 1.5 hours of labor and 1 unit of Beta requires 0.5 hours of labor. Only 4,600 hours of labor is available every year. Glocker employs 4 workers in production, each worker works 2,000 hours per year on average.

   All products use the same raw material, a special organic compound. Purchase price of the organic compound is $20 per kg. Alpha requires 6 kg, Gama requires 3 kg and Beta requires 5 kg of the organic compound for each unit of production. The company can purchase only 35,000 kg per year because of shortage of raw materials.

   The factory has enough machines to support the production.

   Which input is a constraint for production of 2021?

   Which input is not a constraint for production of 2021?

   Which input may become a constraint for production of 2021?

   Possible Answers (Please copy and paste the correct answer into the answer box)

   1. Direct Labor

   2. Raw Material

   3. Machine Hour

   4. Cost of Organic Compound

QUESTION 2

1. Part-2 of 3

   Use information from the previous question.

   What is the Contribution Margin per unit of the Constrained Resource?

   (Possible choices are shown on the right)

   - A. B. C. D. E. F. Alpha - A. B. C. D. E. F. Gama - A. B. C. D. E. F. Beta

   A. 4.38 B. 15.60 C. 29.20 D. 4.65 E. 13.95 F. 7.80

6 points

QUESTION 3

1. Part-3 of 3

   To maximize the profitability, the company decided to produce the products in sequence. The most profitable product will be produced first to meet demand, then the next most profitable product will be produced to meet demand and then the least profitable product will be produced with the remaining resources.

   Determine the order of prodcution.

   - 1. 2. 3.

   Alpha

   - 1. 2. 3.

   Beta

   - 1. 2. 3.

   Gama

QUESTION 4

1. Part-1 of 3

   Kramer Company, makes 3,000 units every year of a component called Axial Tap for use in one of its products. Data concerning the unit production costs of the axial tap for Kramer Company is given follow:

   Direct Material	$33
   Direct Labor	$10
   Variable Manufacturing Overhead	$7
   Fixed Manufacturing Overhead*	$20
   Total Manufacturing Cost per unit	$70

   * based on 3,000 units of production, all of it is Traceable Fixed Cost.

   Hubbert Company, also produces Axial Taps. Hubbert wants to supply all Axial taps to Kramer Company. Hubbert is considering to offer selling price of $66/unit to Kramer. If Hubbert supplies the taps, Kramer Company can discontinue making the Axial Taps, as a result 40% of the above fixed manufacturing overhead cost could be saved. Assume that direct labor is a variable cost. Moreover, Kramer Company could use the facilities presently devoted to production of the Axial Taps to expand production of another product that would increase contribution margin of the other product by $35,000 annually.

   Hubbert Companys normal Contribution Margin for Axial Taps is $18/unit. However, expected Contribution Margin from selling to Kramer is $11/unit. Hubert Company still wants to sell to Kramer for long term strategic purposes. Hubbert will lose 2,000 units of sales to other customers for fulfilling the requirements of Kramer Company because of capacity.

   This proposal is not finalized yet and Kramer and Hubber are reviewing this proposal separately.

   From Kramer's perspective, identify the relevant costs for making the make or buy decision about Hubbert's offer.

   	A.	Hubbert's contribution margin
   	B.	Kramer's contribution margin
   	C.	Hubbert's lost sales
   	D.	Hubbert's selling price
   	E.	Kramer's selling price
   	F.	Variable Manufacturing Overhead
   	G.	Fixed Manufacturing Overhead
   	H.	Direct Material
   	I.	Direct Labor

QUESTION 5

1. Part-2 of 3

   Answer the following questions from Kramer Company's perspective. (All answer should be numeric, number format: no comma, two decimal places 1234.56, NO $ sign before)

   Differential Cost per Unit to make Axial Taps

   Differential Cost per Unit to buy Axial Taps

   Fixed Manufacturing Overhead Cost per unit that is not relevant to the make or buy decision

   Opportunity Cost involved in the decision

QUESTION 6

1. Part-3 of 3

   Based on Make or Buy analysis, Kramer Company should acceptreject11,00024,00035,000increasedecreaseunchanged the offer from Hubbert.

   The analysis shows that Kramer Company's net income will acceptreject11,00024,00035,000increasedecreaseunchanged by acceptreject11,00024,00035,000increasedecreaseunchanged if the decision is to accept the offer.

QUESTION 7

1. Special Order - Hubbert Perspective

   Based on information provided for the previous questions on Kramer and Hubbert, please input the correct answers. Hubbert is considering the proposal to Kramer as special order and does not expect any change in costs.

   Hubbert company's normal selling price of Axial Tap is per unit.

   Hubbert company's variable cost for Axial Tap is per unit.

   Hubbert company's total forgone contribution margin from the lost sales, if the special order is proposed and accepted for $66 per unit, by Kramer is .

   Hubbert company's total incremental contribution margin if the special order is proposed and accepted for $66 per unit by Kramer is .

   (All answer should be numeric, number format: no comma, two decimal places 1234.56, NO $ sign before)

QUESTION 8

1. Should Hubbert make the proposal to sell the axial taps for $66 per unit?

   A.

   No

   B.

   Yes

QUESTION 9

1. If Hubbert proposes to sell the axial taps for $66 per unit, Hubbert's operating income will increase, decrease or remain unchanged by $3,000, $21,000, or $33,000.

   If Hubbert proposes to sell the axial taps for $67, $68, $69, or $70 per unit Hubberts operating income will increase/decrease/remain unchanged

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