Skip to content
Solved Assignments

A Case Study on Gargantuan Industries and Jonathan Macintosh's Orchard

A case study exploring cost analysis and decision-making in manufacturing operations for Gargantuan Industries and Jonathan Macintosh's Orchard.

Preview 3 of 7 pages

See the first 3 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Cost Analysis and Decision - Making in Manufacturing Operations: A Case Study on Gargantuan Industries and Jonathan Macintosh's Orchard Problem 6 - 27 Jonathan Macintosh is a highly successful Pennsylvania orchardman who has formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce production is relatively uniform throughout the year. The recently hired controller for the firm is about to apply the high - low method in estimating the company’s energy cost behavior. The following costs were incurred during the past 12 months: Month Pints of Applesauce Produced Energy Cost January ................................................................ 35,000 ............................................. . $23,400 February ............................................................... 21,000 ............................................. . 22,100 March .................................................................. 22,000 ............................................. . 22,000 April ..................................................................... 24,000 .......................................... .... 22,450 May ..................................................................... 30,000 ............................................ .. 22,900 June .................................................................... 32,000 ............................................ .. 23,350 July ...................................................................... 40,000 .......................................... .... 28,000 August ................................................................. 30,000 ............................................. . 22,800 September ............................................................ 30,000 .............................................. 23,000 October ................................................................ 28,000 ............................................. . 22,700 November ............................................................. 41,000 .............................................. 24,100 December ............................................................ 39,000 .............................................. 2 4,950 Required: 1. Use the high - low method to estimate the company’s energy cost behavior and express it in equation form. • High : The highest production month is July , with 40,000 pints and an energy cost of $28,000 . • Low : The lowest production month is February , with 21,000 pints and an energy cost of $22,100 .

  2. Page 2
  3. Page 3
    Read page 3 as text

    2. Predict the energy cost for a month in which 26,000 pints of applesauce are produced. Refer to the data in the preceding exercise. ■ Problem 7 – 37 Houston - based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets: Sales .......................... .............................. ............................................................... $3,360,000 Variable costs ......................................................... .................................................. 840,000 Fixed costs .................................. ................... ........................................................... 2,280,000 Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18 per set; annual fixed costs are anticipated to be $1,984,000. (In the following requirements, ignore income taxes.) Required: 1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. • Current Income and Dollar Sales to Double It (U.S.): • Current income : $240,000 • Dollar sales needed to double income : $3,680,000 2. Determine the break - even point in speaker sets if operations are shifted to Mexico. Break - even Point in Sets (Mexico Operations): • Break - even point : 32,000 speaker sets 3. Assume that management desires to achieve the Mexican break - even point; however, operations will remain in the United States. a. If variable costs remain constant, what must management do to fixed costs? By how much

4 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Business Management study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.