Published by admin at July 15, 2020 Mendel Paper Companyproduces four basicpaper product linesat one of itsplants: computer paper,napkins,place mats,and poster board.Materials and operationsvary according tothe line ofproduct. The markethas beenrelativelygood. The demandfor napkins andplace mats hasincreased with morepeople eating out,and thedemandfor the otherlines has beengrowing steadily. The plant superintendent,Marlene Herbert, whilepleased with theprospects for increasedsales, isconcernedabout costs: “We hear talkabout a paperlessoffice, but Ihaven’t seen ityet. The computers,if anything, haveincreased themarketfor paper. Ourbig problem nowis the highfixed cost ofproduction. As wehave automated ouroperation,we haveexperienced increases infixed overhead andeven variable overhead.And, we willhave to addmoreequipment sinceit appears thatwe need evenmore plant capacity.We are operatingover our normalcapacity asitis. The place matmarket concerns me.We may have todiscontinue printing themats. Our specialtyprinting isdrivingup the variableoverhead to thepoint where wemay not find itprofitable to continuewith that lineat all.” Cost and pricedata for thenext fiscal quarterare as follows: Computerpaper Napkins Placemats Posterboard Estimated sales volumein units 30,000 120,000 45,000 80,000 Selling prices……………. ?????$14.00 ??????$7.00 ?????$12.00 ??????$8.50 Materials costs………… ???????6.00 ???????4.50 ???????3.60 ????????2.50 Variable overheadincludes the costof hourly laborand the variablecost of equipmentoperation. The fixedplantoverhead isestimated at $420,000for the quarter.Direct labor, toa large extent,is salaried; thecost is includedasa part offixed plant overhead.The superintendent’s concernabout the eventualneed for morecapacity isbasedon increases inproduction that mayreach and exceedthe practical capacityof 60,000 machinehours. […]