Please show step by step. CompDesk, Inc., makes a single model of an ergonomic d
ID: 2538118 • Letter: P
Question
Please show step by step. CompDesk, Inc., makes a single model of an ergonomic desk (with chair) for computer usage. The desk is manufactured in building 1, and the chair is manufactured in bulding 2 Monthly capacities and production levels are as follows: Monthly capacity Monthly production Building 1 (Desks) 400 400 2 (Chairs) 500 400 The company will sella desk only with a chair and can sel 500 desks per month. The unts (desk with chair) sell for $273 each and have a variable cost of $116 each. Required: a. Is there a bottleneck at CompDesk in Building 1 or Building 2? O Building 1 O Building 2 b. CompDesk's production supervisors state they could increase building 1's affect the sales price. Variable cost per unit would increase by $16 for those produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $18,200 per month. capacity by 100 desks per month by producing desks on the weekend. Producing on the weekend would s b-1. Calculate the differential operating profit (loss). (Losses and amounts to be deducted should be indicated with a minus sign.) Differential revenues Differential costs Fixed VariableExplanation / Answer
Req A: Building1 is a bottleneck As the monthly capaciity of Building 1 is 400 units of desks and demand for product is 500 unist. Therefore, Building1 is termed as bottleneck. Req B: B-1: Differential operating profits/Loss: Differential sales revenue (100 units @ 273) 27300 Less: Differential cost Fixed 18200 Variable (100 units @ 132) 13200 Differntial loss -4100 B-2 NO, the company should not produce the desks Req :C: C-1 Differential operating profits/Loss: Differential sales revenue (100 units @ 273) 27300 Less: Differential cost Fixed 14100 Variable (100 units @ 116) 11600 Differential profits 1600 C-2 YES, the company should add equipment and workers to building 1