Module 2 Case Assignment Template and Answer Guide Key

Activity 2-26
Requirement a Klear’s contribution margin per unit $1,000-$100-$500 = $400
Klear’s contribution margin ratio 0.4
Requirement b Number of units Klear must sell to break even 8,750 units
Requirement c Explain if the change will cause Klear’s With the design modification and variable
breakeven to increase/decrease cost reduction Klear’s break-even point will
decrease to 7,778 units. Their current profit
margin before any modifications is $400 per
unit, but with modifications their new profit
margin would be $450. This means they
would need to sell less units to hit their
break-even point.

Activity 3-24
Make Buy
Cost of Purchase $125 x 20,000 units = $120 x 20,000 units =
$2,500,000 $2,400,000
Direct Material Purchase $55 x 20,000 units = $0
$1,100,000
Direct Labor Cost $30 x 20,000 units = $0
$600,000
Variable Overhead $25 x 20,000 units = $0
$500,000
Fixed Overhead $15 x 20,000 units = $0
$300,000
Savings in Facility Costs $0 $113,000
Total Costs $125 x 20,000 units = $120 x 20,000 units –
$2,500,000 $113,000 = $2.287,000

Answer Premier should buy the G37 model. The total cost for
them to make the product is $2.5M and they would
save $326,000 by outsourcing. I did not take into
consideration the additional fixed overhead cost
assuming that cost would fall under the G49 model
costs.

Activity 4-27
Requirement a Direct Material Quantity Price Amount
Part A327 1,500 $70 $105,000
Part B149 1,500 $100 $150,000
Total Direct Material Cost $255,000

Direct Labor Hours Rate Amount

Assembly 6 Hours $20 $120,00
Inspection 1 Hour $22 $22.00
 Total Direct Labor Cost 10,500 Hours $213,000

Overhead Costs Amount

10,500 Direct Labor Hours $157,500
(@ $15/hour)

Total Cost $625,500

Requirement b Selling Price Per Monitor $500.00

Cost Per Monitor $417.00
Gross Margin Per Monitor $83.00

Activity 4-30
Requirement a Cost driver rate for the machine department $32.14/machine hour
Cost driver rate for the finishing department 99 % of direct labor cost

Requirement b Machining Finishing Total

Direct materials cost $9,000 $1,200 $10,200
Direct labor cost $126 $735 $861
Manufacturing overhead (rounded) $1,607 $1,371.42 $2,978.42
Total costs of Job 103 (rounded) $10,733 $3,306.42 $14,039.42

Activity 5-20
Requirement a Design Installation Maintenance
Resource Costs $110,000 $126,000 $215,000
Resource Capacity (hours) 2,100 hours 3,600 hours 9,600 hours
Cost Driver Rate Per Hour $52.38 $35 $22.40

Requirement b Design Installation Maintenance Total Cost

Custom $209.52 $1,050 $10,752 $12,011.52
Deluxe $523.80 $1,575 $14,336 $16,434.80
Estate $1,257.12 $2,625 $19,712 $23,594.12