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dxpayne dxpayne
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5 years ago
Quick Shop Printing has two workstations, cutting and pasting. The cutting station is limited by the speed of operating the cutting machine. Pasting is limited by the speed of the workers. Pasting normally waits on work from cutting. Each department currently works an eight-hour day.

The company is considering having cutting begin work two hours earlier than pasting each day, the two departments would then finish their work at the same time. Not only does this eliminate the bottleneck, but it increases finished units produced each day by 80 units. All units produced can be sold even though the change increases inventory stock by 10 percent from 200 units. The cost of operating the cutting department two more hours each day is $800. The contribution margin of the finished products is $3 each. Inventory carrying costs are $0.20 per unit per day.
What is the change in the daily contribution margin if the change is made?
A) $(396)
B) $(564)
C) $240
D) $236
E) $(604)
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
Authors:
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AllopaAllopa
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#1
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5 years ago
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More solutions for this book are available here
B
Explanation:  B) Total contribution margin (80 × $3)   $240
Carrying costs (20 × $0.20)   -4
Increased costs    -800
Net change in contribution margin   $(564)
1

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wrote...
#2
2 years ago
good thinking, thanks!
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