Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work Farrow Company reports the following annual results. Contribution Margin Income Statement Per Unit Annual Total 2 Sales (220, 000 units) $ 15. 00 $ 3, 300, 000 points Variable costs Direct materials 2. 00 440, 000 Direct labor 4.06 880, 000 Overhead 2.50 550, 000 Contribution margin 6.50 1, 430, 000 Book Fixed costs Fixed overhead 2.00 440, 000 Fixed general and administrative 1.50 330, 000 Hint Income $ 3.00 $ 660, 000 The company receives a special offer for 22,000 units at $12 per unit. The additional sales would not affect its normal sales. Variable Print costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $88,000 and incremental fixed general and administrative costs of $95,000. References (a) Compute the income or loss for the special offer (b) Should the company accept or reject the special offer? Complete this question by entering your answers in the tabs below. Required A Required B Compute the income or loss for the special offer. (Round your "Per Unit" answers to 2 decimal places.) SPECIAL OFFER ANALYSIS Per Unit Total Contribution margin Income (loss) Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work Farrow Company reports the following annual results. Contribution Margin Income Statement Per Unit Annual Total 2 Sales (220, 000 units) $ 15. 00 $ 3, 300, 000 points Variable costs Direct materials 2. 00 440, 000 Direct labor 4.06 880, 000 Overhead 2.50 550, 000 Contribution margin 6.50 1, 430, 000 Book Fixed costs Fixed overhead 2.00 440, 000 Fixed general and administrative 1.50 330, 000 Hint Income $ 3.00 $ 660, 000 The company receives a special offer for 22,000 units at $12 per unit. The additional sales would not affect its normal sales. Variable Print costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $88,000 and incremental fixed general and administrative costs of $95,000. References (a) Compute the income or loss for the special offer (b) Should the company accept or reject the special offer? Complete this question by entering your answers in the tabs below. Required A Required B Should the company accept or reject the special offer? Should the company accept or reject the special offer? Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 2 Beto Company pays $5.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $5.70 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part 2 would be 80% of direct labor cost points (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? Book (a) Make or Buy Analysis Make Buy Direct materials Hint Direct labor Overhead Cost to buy Print Cost per unit Cost difference References (b) Company should: Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 3 A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $42,900 or reworked for $61,100 and then sold for $110,500. 2 points (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? (a) Scrap or Rework Analysis Scrap Rework Book Revenue from scrapped/reworked units Cost of reworked unit Hint Income Incremental income Print (b) The company should References Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 4 Varto Company has 8,200 units of its product in inventory that it produced last year at a cost of $160,000. This year's model is better than last year's, and the 8,200 units cannot be sold at last year's normal selling price of $55 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $90,200 or (2) they can be processed further at an additional cost of $196,200 and 2 then sold for $278,800 points (a) Prepare a sell as is or process further analysis of income effects. (b) Should Varto sell the products as is or process further and then sell them? Book (a) Sell or Process Analysis Sell As Is Process Further Revenue Hint Cost Income Print Incremental income (loss) to sell as is (b) The company should: References Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit 5 Check my work Required information Part 1 of 2 [The following information applies to the questions displayed below.] Suresh Company reports the following segment (department) income results for the year. 2 points Sales Department M Department N Department 0 Department P Department T $ 74, 000 $ 40, 000 $ 67, 000 Total Expenses $ 50, 000 $ 35, 000 $ 266, 000 Avoidable 13,300 10, 600 23, 000 Unavoidable 54,600 17, 500 14, 100 6,80 4,900 138, 500 39, 100 eBook Total expenses 14, 700 57,900 130, 100 7, 400 7,900 56, 600 Income (loss 58, 800 $ 6, 100 268, 600 $ (17, 400) 39, 100 $ (6,600) $ (23, 800) $ (2, 600) Hint Print a. If the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be eliminated? References Department Decision Department M Department N Department O Department P Department T Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit 6 Check my work Required information Part 2 of 2 [The following information applies to the questions displayed below.] Suresh Company reports the following segment (department) income results for the year. 2 points Sales Department M Department N Department 0 Department P Department T $ 74, 000 $ 40, 000 $ 67, 000 Total Expenses $ 50, 000 $ 35, 000 $ 266, 000 Avoidable 13,300 10, 600 Unavoidable 23, 000 54,600 17, 500 14, 100 6,80 4,900 138, 500 39, 100 eBook Total expenses 57,900 14, 700 7, 400 130, 100 7,900 56, 600 Income ( loss 58, 800 $ 6, 100 268, 600 $ (17, 400) 39, 100 $ (6,600) $ (23, 800) $ (2,600) Hint Print b. Compute the total increase in income if the departments with sales less than avoidable costs, as identified in part a, are eliminated. References Total increase in income Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 7 Chip Company produces three products, Kin, Ike, and Bix. Each product uses the same direct material. Kin uses 5.1 pounds of the material, Ike uses 3.7 pounds of the material, and Bix uses 5.8 pounds of the material. Selling price per unit and variable costs per unit of each product follow. 2 points Kin Ike Bix Selling price per unit $ 178. 66 $ 120.63 $ 197.32 Variable costs per unit 94. 00 84.00 137 .00 Book (a) Compute contribution margin per pound of material for each product. (b) If demand is limited, list the three products in the order in which management should produce and meet demand. Hint Product Contribution Margin Kin Ike Bix Print Contribution margin per pound References Order in which management should produce and meet demand: Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 8 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of four years. It can be sold now for $56,000. Variable manufacturing costs are $48,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five 2 years. points Machine A Machine B Purchase price 123, 000 $ 135, 000 Variable manufacturing costs per year 18, 000 14, 000 Book (a) Compute the income increase or decrease from replacing the old machine with Machine A. b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? Hint (d) If the machine should be replaced, which new machine should Lopez purchase? Print Complete this question by entering your answers in the tabs below. References Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should be indicated with a minus sign.) Income Increase Machine A: Keep or Replace Analysis Keep Replace (Decrease) from Replacing Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Req A Req B > Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 8 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $46,000 and a remaining useful life of four years. It can be sold now for $56,000. Variable manufacturing costs are $48,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five 2 years. points Machine A Machine B Purchase price 123, 000 $ 135, 000 Variable manufacturing costs per year 18, 000 14, 000 Book (a) Compute the income increase or decrease from replacing the old machine with Machine A. b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? Hint (d) If the machine should be replaced, which new machine should Lopez purchase? Print Complete this question by entering your answers in the tabs below. References Req A Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should be indicated with a minus sign.) Income Increase Machine B: Keep or Replace Analysis Keep Replace (Decrease) from Replacing Revenues Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $327,500 of its fixed costs are avoidable. 2 Segment Income (Loss) points Sales $ 1, 087, 800 Variable costs 777, 000 Contribution margin 310, 800 Fixed costs 373, 000 Book Income ( loss) $ (62, 200) (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be continued or eliminated? Hint Complete this question by entering your answers in the tabs below. Print Required A Required B References Compute the income increase or decrease from eliminating this segment. Segment Elimination Analysis Continue Eliminate Income Increase (Decrease) Income (loss) Required A Required B > Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 10 Cobe Company has manufactured 275 partially finished cabinets at a cost of $68,750. These can be sold as is for $82,500. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $16,500, and the finished cabinets could be sold for $110,000. 2 points (a) Prepare a sell as is or process further analysis of income effects. (b) Should the cabinets be sold as is or processed further and then sold? (a) Sell or Process Analysis Sell As Is Process Further Book Revenue Costs Hint Income Print Incremental income (loss) to process further (b) The company should References Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 11 Edge Company produces two models of its product with the same machine. The machine has a capacity of 158 hours per month. The following information is available. 2 Standard Deluxe points Selling price per unit $ 160 190 Variable costs per uni 65 114 Contribution margin per unit $ 95 $ 76 Machine hours per unit 1 hour 2 hours Book Maximum unit sales per month 550 units 200 units Required: Print 1. Determine the contribution margin per machine hour for each model. Product Contribution Margin Standard Deluxe References Contribution margin per uni Contribution margin per machine hou 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin 3. Assume the maximum demand for the Standard model is 80 units (not 550 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Homework: Relevant Costing Assignment i Saved Help Save & Exit Submit Check my work 12 JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement 2 For Year Ended December 31 Per Unit Annual Total points Sales (480, 000 units) $ 7.00 $ 3, 360, 000 Variable costs Direct materials 1. 52 729, 600 Direct labor 0.38 182, 400 Variable overhead 0.70 336, 000 Book Contribution margin 4. 40 , 112, 000 Fixed costs Fixed overhead 0.30 144, 000 Print neral and admin 0.20 96, 000 Income $ 3.90 $ 1, 872, 000 References A potential customer offers to buy 58,000 units for $3.70 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow. Direct materials cost per unit and variable overhead cost per unit would not change. Direct labor cost per unit would be $0.56 because the offer would require overtime pay. . Accepting the offer would require incremental fixed general and administrative costs of $5,800. Accepting the offer would require no incremental fixed overhead costs Required: 1. Compute income from the special offer. 2. Should the company accept or reject the special offer? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute income from the special offer. (Round your "Per Unit" answers to 2 decimal places.) Special Offer Analysis Per Unit Total Contribution margin Fixed overhead Fixed general and administrative Income (loss)