2 166 points Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow Sales eBook Hint Print Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses, Net operating income (loss) Allocated on the basis of sales dollars. References Total $ 927,000 Dirt Bikes $270,000 Mountain. Bikest $405,000 Racing Bikes. $252,000 462,000 117,000 191,000 154,000 465,000 153,000 214,000 98,000 69,900 8,200 40,900 20,800 43,800 20,800 7,300 15,700 115,200 40,400 38,300 36,500 185,400 54,000 81,000 50,400 414,300 123,400 167,500 123,400 $ 50,700 $ 29,600 $ 46,500 $ (25,400) Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage (disadvantage) per quarter Required 1 Required 2 2 166 points Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow Sales eBook Hit Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Total fixed expenses Allocated common fixed expenses Print Net operating income (loss) Allocated on the basis of sales dollars. References Total $ 927,000 Dirt Bikes $270,000 Mountain Bikes $405,000 462,000 117,000 191,000 Racing Bikes $ 252,000 154,000 465,000 153,000 214,000 98,000 69,900 8,200 40,900 20,800 43,800 20,800 7,300 15,700 115,200 40,400 38,300 36,500 185,400 54,000 81,000 50,400 414,300 123,400 167,500 123,400 $ 50,700 $29,600 $ 46,500 $ (25,400) Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines Complete this question by entering your answers in the tabs below. Requared 1 Required Required 3 Should the production and sale of racing bikes be discontinued? Yes No 2 Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow 166 points Total Sales Variable manufacturing and selling expenses $ 927,000 462,000 eBook Hint Print Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 465,000 $ 270,000 117,000 153,000 Dirt Bikes Mountain Bikes Racing Bikes $ 405,000 $ 252,000 154,000 191,000 214,000 98,000 69,900 8,200 40,900 20,800 43,800 20,800 7,300 15,700 115,200 40,400 38,300 36,500 185,400 54,000 81,000 50,400 414,300 123,400 167,500 123,400 $ 50,700 $ 29,600 $ 46,500 $ (25,400) "Allocated on the basis of sales dollars References Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a property formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common foxed expenses Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 1.66 3 Exercise 11-3 (Algo) Make or Buy Decision [LO11-3] points Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy 1 Engines, Limited, for a cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally eBook Direct materials Direct labor Variable manufacturing overhead Print References Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $18 18,000 Units per Year $ 324,000 9 162,000 2 36,000 9 162,000 12 216,000 $.50 $900,000 "One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. The segment margin of the new product would be $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? Financial (disadvantage) Required Required 2 > 3 Exercise 11-3 (Algo) Make or Buy Decision [LO11-3] 166 points eBook H Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 162,000 18,000 Units Per Unit per Year $ 18 $ 324,000 9 2 36,000 9. 162,000 12 216,000 $ 50 $900,000 Print Heferences Total cost "One third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1 Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. The segment margin of the new product would be $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 21 Required 3 Required 41 Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. The segment margin of the new product would be $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? Financial advantage 4 166 points Exercise 11-4 (Algo) Special Order Decision [LO11-4] Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The company's accounting system says that the unit product cost for this bracelet is $265.00 as shown below. Direct materials Direct labor Manufacturing overhead eBook Unit product cost Het Print References $146 83 36 $265 The members of a wedding party have approached Imperial Jewelers about buying 18 of these gold bracelets for the discounted price of $365.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $8. Imperial Jewelers would also have to buy a special tool for $461 to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $9.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party? Financial advantage Required 1 Required 2> 166 points LO 5 Exercise 11-6 (Algo) Managing a Constrained Resource [LO11-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's products appears below. Selling price per unit eBook Variable cost per unit Recliner $1,430 $850 Sofa $ 1,860 $ 1,200 Love Seat $1,575 $1,150 Upholstery labor-hours per unit 10 hours 12 hours 5 hours Required: Hint Print References 1 Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime.) Assuming that this extra time would be used to produce sofas, up to how much of an overtime rote per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $50 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if it hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? Maxomum overtime rate per hour 13 166 points LO 5 Exercise 11-6 (Algo) Managing a Constrained Resource [LO11-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information. concerning three of Portsmouth's products appears below: Selling price per unit eBook Variable cost per unit Upholstery labor-hours per unit Recliner $1,430 $ 850 10 hours Sofa $ 1,860 $ 1,200 Love Seat $1,575 $1,150 12 hours 5 hours Required: Hint Print References 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $50 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if it hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $50 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if it hires the nearby upholstering company to make Love Seats? Additional contribution margin per hour Show less A 6 17 points eBook Exercise 11-13 (Algo) Sell or Process Further Decision [LO11-7) Wexpro, Incorporated, produces several products from processing 1 ton of clypton, a rare mineral Material and processing costs total $56,000 per ton, one fourth of which is allocated to product X15. Eight thousand six hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $15 each, or processed further at a total cost of $6,900 and then sold for $21 each Required: 1. What is the financial advantage (disadvantage) of further processing product X15? 2. Should product X15 be processed further or sold at the split-off point? Print 1 References 2 Product X15 should be