Break-Even Analysis: Multiproduct Environment 1. Donald Tweedt started a company to produce and distribute natural fertilizers. Donald's company sells two fertilizers that are wildly popular: green fertilizer and compost fertilizer. Green fertilizer, the most popular among environmentally-minded consumers, commands the highest price and sells for $16 per 30-pound bag. Green fertilizer also requires additional processing and includes environmentally-friendly ingredients that increase its variable costs to $10 per bag. Compost fertilizer sells for $12 and has easily acquired ingredients that require no special processing. It has variable costs of $8 per bag. Tweedt's total fixed costs are $35,000. After some aggressive marketing efforts, Tweedt has been able to drive consumer demand to be equal for each fertilizer. Required: Calculate the number of bags of green fertilizer that will be sold at break-even. Bags Target Profit Analysis 2. Kingman Corp. has been concerned with maintaining a solid annual profit. The company sells a line of fire extinguishers that are perfect for homeowners, for an average of $10 each. The company has perfected its production process and now produces extinguishers with a variable cost of $4 per extinguisher. Kingman's annual fixed costs are $92,000. Kingman's tax rate is 40 percent. Required: Calculate the number of extinguishers Kingman must sell to earn an after-tax profit of $60,000. Extinguishers Make or Buy: Effect on Income 3. Engstrom, Inc., uses 10,000 pounds of a specific component in the production of life preservers each year. Presently, the component is purchased from an outside supplier for $11 per pound. For some time now, the factory has had idle capacity that could be utilized to make the component. Engstrom's costs associated with manufacturing the component are as follows: In addition, if the component is manufactured by Engstrom, the company will hire a new factory supervisor at an annual cost of $32,000. Required: If Engstrom chooses to make the component instead of buying it from the outside supplier, what would be the change, if any, in the company's income? “increase” or “decrease” by $ By $ Limited-Resource Decision 4. Kerrie Velinsky Productions produces music videos in two lengths on separate compact discs. The company can sell its entire production of either product. The relevant data for these two products follow: Total fixed overhead is $240,000. The company has only 100,000 machine hours available for production. Because of the constraint on the maximum number of machine hours, Kerrie must decide which CD to produce to maximize the company's income. Required: Compute the contribution margin per machine hour for each compact disk. Round to the nearest cent. Compact disk 1: $ per machine hour Compact disk 2: $ per machine hour Sell-or-Process Further Decision 5. DePaulis Furniture Manufacturers makes unfinished furniture for sale to customers from its own stores ...