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Answer Key Strategic Business Analysis (Formative Quiz 2) Jaypee Company

The document contains summaries of strategic analyses for several companies: 1) Jaypee Company's contribution margin per kilogram is highest for Product P, followed by Products M and N. To meet production needs, they will use Products P and M. 2) O'Tool's relevant cost of a special order is $1,933 after accounting for delivery costs saved. 3) Elegance Bath Products can produce 410 tubs given its equipment capacity of 4,050 hours. 4) For Star Appliance, manufacturing the product is better than purchasing, with a net benefit of $44,000.

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172 views2 pages

Answer Key Strategic Business Analysis (Formative Quiz 2) Jaypee Company

The document contains summaries of strategic analyses for several companies: 1) Jaypee Company's contribution margin per kilogram is highest for Product P, followed by Products M and N. To meet production needs, they will use Products P and M. 2) O'Tool's relevant cost of a special order is $1,933 after accounting for delivery costs saved. 3) Elegance Bath Products can produce 410 tubs given its equipment capacity of 4,050 hours. 4) For Star Appliance, manufacturing the product is better than purchasing, with a net benefit of $44,000.

Uploaded by

ALMA MORENA
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ANSWER KEY

STRATEGIC BUSINESS ANALYSIS (FORMATIVE QUIZ 2)

JAYPEE COMPANY:
Get the contribution margin per kilogram.
M N P
Contribution Margin per Unit 4.50 4.80 2.95
Required Kilogram for RM/unit** 2.50kg 3.00kg 1.50kg
CM per kilogram 1.80 1.60 1.97
RANKING 2nd 3rd 1st
**RM/unit divided by Normal price per kilo

Allocation:
To meet the planned production of 6,000 kgs, they need 2,800 units of Product P and 720 units of
Product M. (2,800*1.50 kg + 720*2.50 kg)

For additional 1,000 kgs of materials:


Product M has only 280 available based on maximum demand.

280 units * 2.50 = 700 kgs


The remaining 300 kgs will get from Product N. (300 kgs / 3kg = 100 units)

Compute for maximum price:


Product M = 280 units * 4.50 = 1,260
Product N = 100 units * 4.80 = 480
Normal Price = 1,000 * .50 = 500
Maximum Price = 1,260 + 480 + 500 = 2,240

O’TOOL:

Sale foregone if the special order is undertaken = (8.35* 240) 2,004


Less: Delivery cost (71)
Relevant cost 1,933

ELEGANCE BATH PRODUCTS:

The equipment has capacity of 4,050 hours and consumes 2 hours per sink and 5 hours per tub.
2(1,000 sinks) + 5(x) = 4,050 hours
2,000 + 5x = 4,050
5x = 4,050 – 2,000
Total number of tubs to produce = 2,050/5 = 410 tubs

STAR APPLIANCE

Buy Manufacture
Purchase Price 17.50
DM 4.00
DL 8.00
VOH 6.00
Sale foregone because it has no 5.00
alternative use (CM)
17.50 23.00
Multiply by 8,000 140,000 184,000
Net benefit in favor of 44,000
manufacturing the product
XX YY and ZZ
Minimum percentage of fixed cost = 9,000 – 4,000 = 56%
9,000

BSA Company
Revenue if the special order is undertaken
(10,000 x 8) 80,000
Variable cost
(6.25 Variable manufacturing cost + 1.35 Variable
marketing cost = 7.60 x 8) (76,000)
4,000
Loss on CM (regular CM)
= (12.5 – 6.25 – 1.8= 4.45 x 2000) (8,900)
Net loss (4,900)

EXMOUTH MARINE ENGINEERS:


Sale Price 3,100
Labor cost (based on normal – 100x20) 2,000
Materials 500
Minimum Resale Price 5,600

PROBLEM NI LADY ANN:


Total Cost 100,000
Sale if it could be sold 50,000
150,000 / 500 obsolete products
Selling Price per Unit = 300

DIVINE WORD UNIVERSITY: (146,000) – Ask Erjohn for more details

MIRACLE (IVY)

Manufacture Buy
Purchase Price 1.35
DM 108 / 24 carton = 4.5 * 20%= 0.90
DL 72/24 carton = 3.00 * 10% = 0.30
OH 54 / 24= 2.25 – (450,000/300,000)
= 2.25 – 1.50 = 0.75 *10%= 0.075
Total Cost per unit 1.275 1.35
Demand 300,000 300,000
Total Cost 382,500 405,000
Net Disadvantage (22,500) if buy rather than
manufacture

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