ACC 770 Case 26 3
Case 26 - 3
Hanson Manufacturing Company
Pablo Santacruz
For Professor C. E. Reese
In partial fulfillment for the requirements for
ACC 770 – Managerial Accounting
School of Business/Graduate Studies
St. Thomas University
Miami Gardens, Fla.
Term A2/ Fall, 2014
December 11, 2014
Table of Contents
Issues: Questions……………………………………………………..…… 3 - 4
Facts………………………………………………………………..……… 5 - 6
Analysis…………………………………………………………………… 3 - 4
Conclusions: Solution and/or Recommendations……………………… 3 - 4
Reference/Citations/Bibliography……………………………….……… 7
Issues (Questions at end of case facts)
Analysis
Conclusions: Solution and/or Recommendations
1. If the company had dropped product 103 as of January 1, 1993, what effect would that action have had on the $151,000 profit for the first six months of 1993?
Particulars
Product 101
Product 102
Total Cost
Total
Total
Total
Rent
750
Property Taxes
303
Property Insurance
278
Compensation Insurance
280
196
476
Direct Labor
2321
1619
3940
Indirect Labor
792
563
1355
Power
170
Light and Heat
83
Building Service
50
Materials
1372
1251
2623
Supplies
290
Repairs
32
39
71
Total Production Cost
10389
Selling Expense
1634
1216
2850
General Admn.
580
432
1012
Depreciation
2681
Interest
290
Total Cost
17,222
Less Other Income
42
21231
21,382
Actual Sales
9279
6901
16180
Profit or Loss
-2.495
If Hanson had discontinued Product 103 from January 1993, they would have suffered an even bigger loss of -2.495 million.
2. In January 1994, should the company reduce the price of product 101 from $9.41 to $8.47?
If you consider the unit contribution margin and the volume increase, then the price reduction makes sense. The variable costs for Product 101 are $2.09 per cwt/unit. The contribution margin for the $9.41 price equals $4.152. If you multiply the $4.152 contribution margin by the volume (750,000) for the $9.41 price you get
Hanson Manufacturing Company
Pablo Santacruz
For Professor C. E. Reese
In partial fulfillment for the requirements for
ACC 770 – Managerial Accounting
School of Business/Graduate Studies
St. Thomas University
Miami Gardens, Fla.
Term A2/ Fall, 2014
December 11, 2014
Table of Contents
Issues: Questions……………………………………………………..…… 3 - 4
Facts………………………………………………………………..……… 5 - 6
Analysis…………………………………………………………………… 3 - 4
Conclusions: Solution and/or Recommendations……………………… 3 - 4
Reference/Citations/Bibliography……………………………….……… 7
Issues (Questions at end of case facts)
Analysis
Conclusions: Solution and/or Recommendations
1. If the company had dropped product 103 as of January 1, 1993, what effect would that action have had on the $151,000 profit for the first six months of 1993?
Particulars
Product 101
Product 102
Total Cost
Total
Total
Total
Rent
750
Property Taxes
303
Property Insurance
278
Compensation Insurance
280
196
476
Direct Labor
2321
1619
3940
Indirect Labor
792
563
1355
Power
170
Light and Heat
83
Building Service
50
Materials
1372
1251
2623
Supplies
290
Repairs
32
39
71
Total Production Cost
10389
Selling Expense
1634
1216
2850
General Admn.
580
432
1012
Depreciation
2681
Interest
290
Total Cost
17,222
Less Other Income
42
21231
21,382
Actual Sales
9279
6901
16180
Profit or Loss
-2.495
If Hanson had discontinued Product 103 from January 1993, they would have suffered an even bigger loss of -2.495 million.
2. In January 1994, should the company reduce the price of product 101 from $9.41 to $8.47?
If you consider the unit contribution margin and the volume increase, then the price reduction makes sense. The variable costs for Product 101 are $2.09 per cwt/unit. The contribution margin for the $9.41 price equals $4.152. If you multiply the $4.152 contribution margin by the volume (750,000) for the $9.41 price you get
Citations: Bibliography Works Cited Anthony, Robert N., and David F. Hawkins. "Strategic Planning and Budgeting." Accounting: Text and Cases. 13th ed. New York: McGraw-Hill/Irwin, 2011. Print.