凇빼)令10096 pol, Sun 6:08 PM i Chrome File Edit iew History Bookmarks People Window Help ● ○ ● / M eTextbooks I Rent or Buy On x) Bookshelf Online: Managerial × ぐ i Secure! https://firstname.lastname@example.org:44.5 costs as given in S8-6) 屳 8. Relevant Costs for Salary of the department's manager Cost of advertising directly related to that department If Devine Fashion discontinues a department, it will not incur these fixed expenses. Under these circumstances, should Devine Fashion discontinue any of the departments? Give your reason. Go to 8. Relevant Costs for Short-Term Decisions How Do Managers Make S8-8 Replace a department (Learning Objective 4) Consider Devine Fashion from S8-6. Assume once again that all fixed costs are unavoid- able. If the company discontinues one of the current departments, it plans to replace the discontinued department with a Shoe Department. The company expects the Shoe Department to produce $84,000 in sales and have $47,000 of variable costs. Because the shoe business would be new to Devine Fashion, the company would have to incur an ad- ditional $7,100 of fixed costs (advertising, new shoe display racks, and other fixed costs) per quarter related to the department. What should the company do now? How Do Managers Make Pricing and Special OrderDecisions? 448 How Do Managers Make Other Special Business Decisions? S8-9 Product mix decision: Unlimited demand (Learning Objective 5) Storage Solutions produces plastic storage bins for household storage needs. The com- pany makes two sizes of bins: Large (50 gallon) and Regular (35 gallon). Demand for the product is so high that the company can sell as many of each size as it can produce. The same machinery is used to produce both sizes. The machinery is available for only 3,000 hours per period. The company can produce 10 Large bins every hour compared to 15 Regular bins in the same amount of time. Fixed expenses amount to $110,000 per period. Sales prices and variable costs are as follows: 477 End of Chapter Sales price per u Variable cost per unit Regular Large $10.50 $4.20 $8.10 3.50 . Which product should Storage Solutions emphasize? Why? 2. To maximize profits, how many of each size bin should the company produce? . Given this product mix, what will the company's operating income be?
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