ManagerialAccounting-OP_x3x7rSO-113

Prévia do material em texto

EB4. 10.2 Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all
30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitri’s
normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the
special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the
normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt
any of Dimitri’s other operations. What will be the impact on profits of accepting the order?
EB5. 10.2 Aspen Enterprises makes award pins for various events. Budget information regarding the
current period is:
A fraternity with which Aspen has a long relationship approached Aspen with a special order for 6,000 pins at a
price of $2.75 per pin. Variable costs will be the same as the current production, and the special order will not
impact the rest of the company’s orders. However, Aspen is operating at capacity and will incur an additional
$5,000 in fixed manufacturing overhead if the order is accepted. Based on this information, what is the
differential income (loss) associated with accepting the special order?
EB6. 10.3 Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in
the production of the boxed lunches. The costs to make the cookies are:
A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased,
10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?
EB7. 10.3 Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company
has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of
$27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently.
The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed
costs. Should Oat Treats make or buy the oat bars?
Chapter 10 Short-Term Decision Making 551
EB8. 10.4 The Party Zone is trying to decide whether or not to continue its costume segment. The
information shown is available for Party Supply’s business segments. Assume that neither the Direct fixed
costs nor the Allocated common fixed costs may be eliminated, but will be allocated to the two remaining
segments.
If costumes are dropped, what change will occur to profit?
EB9. 10.5 Beretti’s Food Mart has 6,000 pounds of raw pork nearing its expiration date. Each pound has a
cost of $5.50. The pork could be sold “as is” for $2.50 per pound to the dog food processing plant, or it could
be made into custom Italian sausage and sold in the meat department. The cost of the sausage making is
$3.00 per pound and each pound could be sold for $7.50. What should be done with the pork and why?
EB10. 10.5 Balcom Dairy gathered this data about the two products that it produces:
Which of the products should be processed further?
EB11. 10.6 Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product
passes through the sharpening machine area, which is the chief constraint during production. Handsaw
blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table
saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it
is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum
demand for each product of 4,000 units, how much will profits increase if 200 more hours of machine time can
be obtained?
EB12. 10.6 Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product
passes through the sharpening machine area, which is the chief constraint during production. Handsaw
blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table
saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it
is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum
demand for each product of 4,000 units, how many of each product should be made?
552 Chapter 10 Short-Term Decision Making
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
Problem Set A
PA1. 10.1 Artisan Metalworks has a bottleneck in their production that occurs within the engraving
department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per
year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per
year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided,
calculate the annual financial impact of hiring the extra worker.
PA2. 10.1 Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs
and requires $1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera
further to enhance its functionality, it will require an additional $45 per unit of variable costs, plus an increase
in fixed costs of $1,000 per month. The current price of the camera is $160. The marketing manager is positive
that they can sell more and charge a higher price for the improved version. At what price level would the
upgraded camera begin to improve operational earnings?
PA3. 10.2 Marcotti Cupcakes bakes and sells a basic cupcake for $1.25. The cost of producing 600,000
cupcakes in the prior year was:
At the start of the current year, Marcotti received a special order for 15,000 cupcakes to be sold for $1.10 per
cupcake. To complete the order, the company must incur an additional $700 in total fixed costs to lease a
special machine that will stamp the cupcakes with the customer’s logo. This order will not affect any of
Marcotti’s other operations and it has excess capacity to fulfill the contract. Should the company accept the
special order? (Show your work.)
Chapter 10 Short-Term Decision Making 553
PA4. 10.2 Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day
plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted
to a bathroom. Ken has produced a bid for $5000 to complete the bathroom. He did not provide David with the
details of the bid. However, they are shown here.
A. The town’s social services has asked Ken if he could reduce his bid to $4000. Should Ken accept the
counter offer?
B. How much would his income be reduced?
C. If the town’s social services guaranteed him another job next month at his normal price, could he
accept this job at $4000?
554 Chapter 10 Short-Term Decision Making
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
PA5. 10.3 Boston Executive, Inc., produces executive limousines and currently manufactures the mini-bar
inset at these costs:
The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per unit and supply 1,000
mini-bars for the coming year’s estimated production. If the company accepts this offer and shuts down
production of this part of the business, production workers and supervisors will be reassigned to other areas.
Assume that for the short-term decision-making process demonstrated in this problem, the company’s total
labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased.
The specialized equipment cannot be used and has no market value. However, the space occupied by the mini-
bar production can be used by a different production group that will lease it for $55,000 per year. Should the
company make or buy the mini-bar insert?
PA6. 10.3 Gent Designs requires three units of part A for every unit of A1 that itproduces. Currently, part A
is made by Gent, with these per-unit costs in a month when 4,000 units were produced:
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated
fixed costs. Gent will need 6,000 units of part A for the next year’s production.
Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. If Gent accepts the
offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the
offer from Cory Corporation?
PA7. 10.4 Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the
company has 4,600 partially completed X Plus models on hand. The government has put a recall on a particular
part in the X Plus model, so each base model must now be reworked to accommodate the style of the new
part. The company has spent $110 per unit to manufacture these X Plus models to their current state.
Reworking each X Plus model will cost $20 for materials and $20 for direct labor. In addition, $7 of variable
overhead and $32 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will
be allocated per unit. If Trifecta completes the X Plus models, it can sell them for $160 per unit. On the other
hand, another manufacturer is interested in purchasing the partially completed units for $104 each and
converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta should
complete the X Plus models or sell them in their current state.
Chapter 10 Short-Term Decision Making 555
	Chapter 10. Short-Term Decision Making
	Problem Set A