Solution must be different as much as possible from solution manual of horngren. Excel format is a
Question:
Solution must be different as much as possible from solution manual of horngren.
- Excel format is a must.
.
Fashion Fabrics makes pants from a special material. The fabric is special because of the way it fits many body types. The pants sell for $142. A well-known retail establishment has asked Fashion Fabrics to produce 3,000 shorts from the same fabric. The factory has unused capacity, so Barbara Brooks, the owner of Fashion Fabrics, calculates the cost of making a pair of shorts from the fabric. Costs for the pants and shorts are as follows:
Pants Shorts
Fabric (6yds. x 12;3yds. x$12) $72 36
Variable Direct mfg. labor 20 10
Variable mfg. Overhead 8 4
Fixed mfg. cost allocated 15 9
Total mfg. costs $115 $59
Required:
1. Suppose Fashion Fabrics can acquire all the fabric that it needs. What is the minimum price the company should charge for the shorts?
2. Now suppose that the fabric is in short supply. Every yard of fabric Fashion Fabrics uses to make shorts will reduce the pants that it can make and sell. What is the minimum price the company should charge for the shorts?
Wechsler Company produces three products: A130, B324, and C587. All three products use the same direct material, Brac. Unit data for the three products are:
ProductA130 ProductA130 ProductA130
Selling Price 252 168 210
Variable costs
Direct labor 72 45 27
Labor and others 84 81 120
Quantity per units 8lb. 5 lb. 3 lb.
The demand for the products far exceeds the direct materials available to produce the products. Brac costs $9 per pound, and a maximum of 5,000 pounds is available each month. Wechsler must produce a minimum of 200 units of each product.
Required:
1. How many units of product A130, B324, and C587 should Wechsler produce?
2. What is the maximum amount Wechsler would be willing to pay for another 1,200 pounds of Brac?
Ainsley Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2017 follows:
Division A B C D
Sales $504,000 948,000 960,000 1,240,000
Cost of goods sold 440,000 930,000 765,000 925,000
Selling, general expenses 96,000 202,500 144,000 210,000
Operating income/loss (32,000) (184,500) 51,000 105,000
Further analysis of cost reveals the following percentage of variable costs in each division:
Cost of goods sold 90% 80% 90% 85%
Selling, general expense 50% 50% 60% 60%
Closing down any division would result in savings of 40% of the fixed costs of that division. Top management is very concerned about the unprofitable divisions (A and B) and is considering closing them for the year.
Required:
1. Calculate the increase or decrease in operating income if Ainsley closes division A.
2. Calculate the increase or decrease in operating income if Ainsley closes division B.
3. What other factors should the top management of Ainsley consider before making a decision?
Mechum River Anglers, a division of Old Dominion Travel, offers two types of guided fly fishing tours, Basic and Deluxe. Operating income for each tour type in 2017 is as follows:
Basic Deluxe
Revenues (500 $900; 400 $1,650) $450,000 $660,000
Operating costsAdministrative salaries 120,000 100,000
Guide wages 130,000 380,000
Supplies 50,000 100,000
Depreciation of equipment 25,000 60,000
Vehicle fuel 30,000 24,000
Allocated corporate overhead 45,000 66,000
Total operating costs 400,000 730,000
Operating income (loss) $50,000 $(70,000)
The equipment has a zero disposal value. Guide wages, supplies, and vehicle fuel are variable costs with respect to the number of tours. Administrative salaries are fixed costs with respect to the number of tours. Brad Barrett, Mechum River Anglers' president, is concerned about the losses incurred on the deluxe tours. He is considering dropping the deluxe tour and offering only the basic tour.
Required:
1. If the deluxe tours are discontinued, one administrative position could be eliminated, saving the company $50,000. Assuming no change in the sales of basic tours, what effect would dropping the deluxetour have on the company's operating income?
2. Refer back to the original data. If Mechum River Anglers drops the deluxe tours, Barrett estimates that sales of basic tours would increase by 50%. He believes that he could still eliminate the $50,000 administrative position. Equipment currently used for the deluxe tours would be used by the additional basic tours. Should Barrett drop the deluxe tour? Explain.
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan