1. Grace Greeting Cards Incorporated is starting a new business venture and is in the process of evaluating its product lines. Information for one new product traditional parchment grade cards is as follows:· For 16 times each year a new card design will be put into production. Each new design will require $200 in setup costs.· The parchment grade card product line incurred $75 000 in development costs and is expected to be produced over the next four years.· Direct costs of producing the designs average $0.50 each.· Indirect manufacturing costs are estimated at $50 000 per year.· Customer service expenses average $0.10 per card.· Sales are expected to be 2 500 units of each card design. Each card sells for $3.50.· Sales units equal production units each year.What is the total estimated life-cycle operating income?2. Jane’s Medical Equipment Company manufactures hospital beds. Its most popular model Deluxe sells for $5 000. It has variable costs totaling $2 800 and fixed costs of $1 000 per unit based on an average production run of 5 000 units. It normally has four production runs a year with $700 000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30 000 beds.A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4 000. Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The company sells all the Deluxe beds it can produce. Question 1: What is the annual operating income from Deluxe at the price of $5 000? Question 2: What is the annual operating income from Deluxe if the price is reduced to $4 000 and sales in units increase by 25%?3. For supply item MT Bluesky Company has been ordering 150 units based on the recommendation of the salesperson who calls on the company monthly. The company has hired a new purchasing agent who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:Annual demand in units 300Days used per year 300Lead time in days 20Ordering costs $125Annual unit carrying costs $25Determine the EOQ average inventory orders per year average daily demand reorder point annual ordering costs and annual carrying costs.4. Gardenia Company has the following projected account balances for June 30 20X9:Accounts payable $ 60 000 Sales $ 800 000Accounts receivable $ 100 000 Capital stock $ 400 000Depreciation factory $ 36 000 Retained earnings ?Inventories (5/31 & 6/30) $ 180 000 Cash $ 56 000Direct materials used $ 200 000 Equipment net $ 240 000Office salaries $ 80 000 Buildings net $ 400 000Insurance factory $ 4 000 Utilities factory $ 16 000Plant wages $ 140 000 Selling expenses $ 50 000Bonds payable $ 160 000 Maintenance factory $ 28 000Prepare a budgeted income statement AND a budgeted balance sheet as of June 30 20X9.5. Novacar Company manufactures automobiles. The red car division sells its red cars for $25 000 each to the general public. The red cars have manufacturing costs of $12 500 each for variable and $5 000 each for fixed costs. The division’s total fixed manufacturing costs are $25 000 000 at the normal volume of 5 000 units.The blue car division has been unable to meet the demand for its cars this year. It has offered to buy 1 000 cars from the red car division at the full cost of $13 000. The red car division has excess capacity and the 1 000 units can be produced without interfering with the outside sales of 5 000. The 6 000 volume is within the division’s relevant operating range.Explain whether the red car division should accept the offer. Support your decision showing all calculations.
