Green Bay Packer Cheese Heads - Nolene’s Novelties Manufacturing - Accounting Assessment Answer

Accounting Assessment Task

Managing Constraint Resources

Nolene’s Novelties manufacturing Green Bay Packer cheese heads(small medium and large) that are sold to area retailers. Production takes 0.20 , 0.25 minutes and 0.30 machine hours to manufacture one unit of small, medium and large cheese heads respectively. The Company has monthly capacity of 2500 machine hours. The following per unit data apply for the month of August.

Required :
a) How many units each size should Nolene’s produce this month to maximize profits ?
b) Suppose a foreign firm places a special order for the purchase of an additional 1000 medium cheese heads of $50 earch
a. Determine the opportunity cost for this order
b. What other issues might Nolene like to consider before accepting this special order ?

c) Suppose available machine hour capacity is reduced to 2000 machine hours due to a machine- breakdown. How many units each size should Nolene produce to maximize profits ?
d) Effectively managing an organization’s constraints is a key to increase profits. Explain the ways a manager can relax (or elevate) the constraints.

Problem 2
Make vs Buy Decision and Dropping or Retaining a Segment Hanson Inc. makes 1000 unit per year of a part called prositron for use in one of it products.
Data concerning the unit production costs of the prositron follow :
Direct materials                        $342
Direct labour                                 80
Variable manufacturing overhead 48
Fixed manufacturing overhead    520
Total manufacturing cost per unit 990

An outside supplier has offered to sell Hanson. Inc all of the prositrons if requires. If Hanson Inc. decides to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.
Required :
a) Assume Hanson Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson Inc. accept the offer ? Fully support your answer with appropriate calculations 
b) Assume that Hanson Inc could use the facilities presently devoted to production of the prositrons to expand production of another product that would yield an additional contribution margin of $50,000 annually. What is the maximum price Hanson Inc. should be willing to pay the
outside supplier for prositrons ? 
c) What strategic factors manager should consider in make or buy decision 
d) “If a product is generating a loss, then it should be discontinue “ Do you agree ? Explain Carefully

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