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ACC 770 Case 26 3

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ACC 770 Case 26 3
Case 26 - 3
Hanson Manufacturing Company
Pablo Santacruz
For Professor C. E. Reese
In partial fulfillment for the requirements for
ACC 770 – Managerial Accounting
School of Business/Graduate Studies
St. Thomas University
Miami Gardens, Fla.
Term A2/ Fall, 2014
December 11, 2014

Table of Contents
Issues: Questions……………………………………………………..…… 3 - 4

Facts………………………………………………………………..……… 5 - 6

Analysis…………………………………………………………………… 3 - 4

Conclusions: Solution and/or Recommendations……………………… 3 - 4

Reference/Citations/Bibliography……………………………….……… 7

Issues (Questions at end of case facts)
Analysis
Conclusions: Solution and/or Recommendations
1. If the company had dropped product 103 as of January 1, 1993, what effect would that action have had on the $151,000 profit for the first six months of 1993?
Particulars
Product 101
Product 102
Total Cost

Total
Total
Total

Rent

750
Property Taxes

303
Property Insurance

278
Compensation Insurance
280
196
476
Direct Labor
2321
1619
3940
Indirect Labor
792
563
1355
Power

170
Light and Heat

83
Building Service

50
Materials
1372
1251
2623
Supplies

290
Repairs
32
39
71

Total Production Cost

10389

Selling Expense
1634
1216
2850
General Admn.
580
432
1012
Depreciation

2681
Interest

290

Total Cost

17,222
Less Other Income

42

21231

21,382
Actual Sales
9279
6901
16180

Profit or Loss

-2.495

If Hanson had discontinued Product 103 from January 1993, they would have suffered an even bigger loss of -2.495 million.
2. In January 1994, should the company reduce the price of product 101 from $9.41 to $8.47?
If you consider the unit contribution margin and the volume increase, then the price reduction makes sense. The variable costs for Product 101 are $2.09 per cwt/unit. The contribution margin for the $9.41 price equals $4.152. If you multiply the $4.152 contribution margin by the volume (750,000) for the $9.41 price you get



Citations: Bibliography Works Cited Anthony, Robert N., and David F. Hawkins. "Strategic Planning and Budgeting." Accounting: Text and Cases. 13th ed. New York: McGraw-Hill/Irwin, 2011. Print.

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