relevantcostcases.docVIP

RELEVANT COST CASES: Problem 1: Judson Company Judson Company makes widgets and wangles, both of which use a polishing machine as part of production. The widgets and wangles have the following price and cost characteristics: Widgets Wangles Annual Capacity 1,000 units 2,000 units Price per unit $50 $100 Variable Cost per unit $20 $50 Annual fixed costs $10,000 $10,000 Polishing machine hours per unit 1 hour 2 hours The polishing machine can operate for a total of 3,000 hours during the year. What product mix creates the most profit for Judson Company, given all the constraints? If there were only machine hour constraints what product mix would create the greatest profit mix for Judson? Problem 2:N N is a Web site that offers users access to current national and international news stories. N doesn’t charge users a fee for accessing the site but charges advertisers $0.05 per “hit” to the Web site, which is a user who logs on. The user’s e-mail address is also provided to the advertiser. N is considering tow alternate internet service providers (ISPs), NetCom and Globalink, that will link N’s computer system to the Internet. These firms are identical in terms of access speeds and number of users able to connect to the site per minute and both are equally reliable. NetCom proposes to charge $3,000 per month plus $0.01 per hit to News.Com. Globalink will chare $2,000 per month plus $0.02 per hit. Assume that the only costs that N incurs are the ISP’s access fees. calculate the number of hits to its web site needed to break even if N uses NetCom and if it uses Globalink. Which ISP do you recommend N use? Explain why. Monthly demand (in terms of number of hits) for N is expected to be either 50.000 if the economy is slumping or 150.000 if it is booming, each of which is equally probable. Which ISP should N choose and why? Case 1: Cost of Scrap and joint costs –ITI ITI Technology designs and manufactures solid state computer chips. In one of its pr