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Data table Selling price Variable manufacturing cost per unit Variable marketing cost per unit Budgeted total fixed overhead costs Hours required to produce one unit on the regular machine SA GA $ $ $ A6 95 $ 65 $ 20 $ 380,000 $ 1.0 EX4 180 115 30 575,000 0.5 Additional information includes the following: a. Lelime faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $575,000 budgeted fixed overhead costs of EX4, $350,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Lelime uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. - Lelime Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Lelime's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. Contribution margin per hour of the constrained resource Hours of constrained resource X Total contribution margin Less: Lease costs of the high-precision machine Net relevant benefit A6 10 50000 500000 500000 EX4 70 50000 3500000 350000 3150000

Data table Selling price Variable manufacturing cost per unit Variable marketing cost per unit Budgeted total fixed overhead costs Hours required to produce one unit on the regular machine SA GA $ $ $ A6 95 $ 65 $ 20 $ 380,000 $ 1.0 EX4 180 115 30 575,000 0.5 Additional information includes the following: a. Lelime faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $575,000 budgeted fixed overhead costs of EX4, $350,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Lelime uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. - Lelime Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Lelime's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. Contribution margin per hour of the constrained resource Hours of constrained resource X Total contribution margin Less: Lease costs of the high-precision machine Net relevant benefit A6 10 50000 500000 500000 EX4 70 50000 3500000 350000 3150000

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...
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Data table Selling price Variable manufacturing cost per unit Variable marketing cost per unit Budgeted total fixed overhead costs Hours required to produce one unit on the regular machine SA GA $ $ $ A6 95 $ 65 $ 20 $ 380,000 $ 1.0 EX4 180 115 30 575,000 0.5 Additional information includes the following: a. Lelime faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $575,000 budgeted fixed overhead costs of EX4, $350,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Lelime uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. -
Transcribed Image Text:Data table Selling price Variable manufacturing cost per unit Variable marketing cost per unit Budgeted total fixed overhead costs Hours required to produce one unit on the regular machine SA GA $ $ $ A6 95 $ 65 $ 20 $ 380,000 $ 1.0 EX4 180 115 30 575,000 0.5 Additional information includes the following: a. Lelime faces a capacity constraint on the regular machine of 50,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $575,000 budgeted fixed overhead costs of EX4, $350,000 are lease payments for the high-precision machine. This cost is charged entirely to EX4 because Lelime uses the machine exclusively to produce EX4. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. -
Lelime Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Lelime's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. Contribution margin per hour of the constrained resource Hours of constrained resource X Total contribution margin Less: Lease costs of the high-precision machine Net relevant benefit A6 10 50000 500000 500000 EX4 70 50000 3500000 350000 3150000
Transcribed Image Text:Lelime Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high-precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the regular machine and a high-precision machine. The following information is available: (Click to view the information.) Read the requirements. Requirement 1. What product mix - that is, how many units of A6 and EX4 - will maximize Lelime's operating income? Show your calculations. (Enter an amount in each input cell including zero balances.) Begin by calculating the benefit from only selling A6 or EX4. Contribution margin per hour of the constrained resource Hours of constrained resource X Total contribution margin Less: Lease costs of the high-precision machine Net relevant benefit A6 10 50000 500000 500000 EX4 70 50000 3500000 350000 3150000
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