2. (TCO 7) Each year ACE Engines surveys 7600 former and prospective customers regarding satisfaction and brand awareness. For the current year the company is
considering outsourcing the survey to RBG Associates who have offered to conduct the survey and summarize results for $50000. Robert Ace the president of ACE
Engines believes that RBG will do a higher-quality job than his company has been doing but is unwilling to spend more than $12000 above current costs. The head
of bookkeeping for ACE has prepared the following summary of costs related to the survey in the prior year. Mailing $27000
Printing (done by Lester Print Shop) 9000
Salary of Pat Fisher part-time employee who stuffed envelopes and summarized data when surveys were returned (130 x $16) 2080
Share of depreciation of computer and software used to track survey responses and summarize results 1200
Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company 600 Total $39880
Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey as in the past. Will ACE accept the
RBG offer? Why or why not? 3. (TCO 4) Savadyne Inc. produces flash drives. The selling price is $8 per drive. The variable cost of production is $2.40 per unit and the fixed cost per month
is $3600. (a) Calculate the contribution margin associated with each flash drive.
(b) In August the company sold 200 more flash drives than planned. What is the expected effect on profit of selling the additional drives?
(c) Calculate the contribution margin ratio associated with one flash drive.
(d) In October the company had sales that were $2400 higher than planned. What is the expected effect on profit related to the additional sales?