How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?
admin
126. How much profit (loss)
does the company make by processing the intermediate product beet juice into
refined sugar rather than selling it as is?
A) $1
B) ($17)
C) $19
D) ($52)
127. Which of the intermediate products should be processed further?
A) beet fiber should be processed into
industrial fiber; beet juice should be processed into refined sugar
B) beet fiber should NOT be processed into
industrial fiber; beet juice should NOT be processed into refined sugar
C) beet fiber should NOT be processed into
industrial fiber; beet juice should be processed into refined sugar
D) beet fiber should be processed into
industrial fiber; beet juice should NOT be processed into refined sugar
Essay
Questions
128. Saalfrank Corporation is considering two alternatives that are
code-named M and N. Costs associated with the alternatives are listed below:
Alternative M
Alternative N
Supplies costs………
$43,000
$53,000
Assembly costs……
$43,000
$56,000
Power costs…………
$26,000
$26,000
Inspection costs…..
$19,000
$26,000
Required:
a.
Which costs are relevant and
which are not relevant in the choice between these two alternatives?
b.
What is the differential cost
between the two alternatives?
129. Costs associated with two alternatives, code-named Q and R, being
considered by Albiston Corporation are listed below:
Alternative Q
Alternative R
Supplies costs………
$65,000
$65,000
Power costs…………
$30,000
$29,000
Inspection costs…..
$18,000
$29,000
Assembly costs……
$33,000
$33,000
Required:
a.
Which costs are relevant and
which are not relevant in the choice between these two alternatives?
b.
What is the differential cost
between the two alternatives?
130. The most recent monthly income statement for Benner Stores is given
below:
Total
Store A
Store B
Sales…………………………….
$1,000,000
$400,000
$600,000
Variable expenses…………..
580,000
160,000
420,000
Contribution
margin……….
420,000
240,000
180,000
Traceable fixed
expenses…
300,000
100,000
200,000
Store segment
margin……..
120,000
140,000
(20,000)
Common fixed
expenses…
50,000
20,000
30,000
Net operating
income……..
$ 70,000
$120,000
($ 50,000)
Due to its poor
showing, consideration is being given to closing Store B. Studies show that if
Store B is closed, one-fourth of its traceable fixed expenses will continue
unchanged. The studies also show that closing Store B would result in a 10
percent decrease in sales in Store A. The company allocates common fixed
expenses to the stores on the basis of sales dollars.
Required:
Compute the overall
increase or decrease in the company’s operating income if Store B is closed.
131. Companies often allocate common fixed costs among segments. For
example, common fixed corporate costs are often allocated to divisions and
appear as part of the divisional performance reports.
Required:
What dangers are
there in allocating common fixed costs to segments when involved in a decision
to possibly drop a segment such as a product or a division?
132. The management of Schmader Corporation is considering dropping
product M12C. Data from the company’s accounting system appear below:
Sales………………………………………………………..
$550,000
Variable expenses……………………………………..
$242,000
Fixed
manufacturing expenses……………………
$215,000
Fixed selling and
administrative expenses…….
$132,000
All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $137,000 of the fixed
manufacturing expenses and $79,000 of the fixed selling and administrative
expenses are avoidable if product M12C is discontinued.
Required:
a.
What is the net operating
income earned by product M12C according to the company’s accounting system?
Show your work!
b.
What would be the effect on the
company’s overall net operating income of dropping product M12C? Should the
product be dropped? Show your work!
133. Suire Corporation is considering dropping product D14E. Data from
the company’s accounting system appear below:
Sales………………………………………………………..
$340,000
Variable expenses……………………………………..
$156,000
Fixed
manufacturing expenses……………………
$116,000
Fixed selling and
administrative expenses…….
$75,000
All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $72,000 of the fixed manufacturing
expenses and $48,000 of the fixed selling and administrative expenses are
avoidable if product D14E is discontinued.
Required:
a.
According to the company’s
accounting system, what is the net operating income earned by product D14E?
Show your work!
b.
What would be the effect on the
company’s overall net operating income of dropping product D14E? Should the
product be dropped? Show your work!
134. The management of Wengel Corporation is considering dropping
product B90D. Data from the company’s accounting system appear below:
Sales………………………………………………………..
$720,000
Variable expenses……………………………………..
$374,000
Fixed
manufacturing expenses……………………
$245,000
Fixed selling and
administrative expenses…….
$209,000
All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $173,000 of the fixed
manufacturing expenses and $150,000 of the fixed selling and administrative
expenses are avoidable if product B90D is discontinued.
Required:
What would be the
effect on the company’s overall net operating income if product B90D were
dropped? Should the product be dropped? Show your work!
135. Foubert Company makes 40,000 units per year of a part it uses in
the products it manufactures. The unit product cost of this part is computed as
follows:
Direct materials………………………………
$13.80
Direct labor……………………………………
18.10
Variable
manufacturing overhead……..
4.30
Fixed
manufacturing overhead…………
24.60
Unit product cost……………………………
$60.80
An outside supplier
has offered to sell the company all of these parts it needs for $51.80 a unit.
If the company accepts this offer, the facilities now being used to make the
part could be used to make more units of a product that is in high demand. The
additional contribution margin on this other product would be $268,000 per
year.
If the part were
purchased from the outside supplier, all of the direct labor cost of the part
would be avoided. However, $17.00 of the fixed manufacturing overhead cost
being applied to the part would continue even if the part were purchased from
the outside supplier. This fixed manufacturing overhead cost would be applied
to the company’s remaining products.
Required:
a.
How much of the unit product
cost of $60.80 is relevant in the decision of whether to make or buy the part?
b.
What is the net total dollar
advantage (disadvantage) of purchasing the part rather than making it?
c.
What is the maximum amount the
company should be willing to pay an outside supplier per unit for the part if
the supplier commits to supplying all 40,000 units required each year?
126. How much profit (loss)
does the company make by processing the intermediate product beet juice into
refined sugar rather than selling it as is? A) $1 B) ($17) C) $19 D) ($52) 127. Which of the intermediate products should be processed further? A) beet fiber should be processed into
industrial fiber; beet juice should be processed into refined sugar B) beet fiber should NOT be processed into
industrial fiber; beet juice should NOT be processed into refined sugar C) beet fiber should NOT be processed into
industrial fiber; beet juice should be processed into refined sugar D) beet fiber should be processed into
industrial fiber; beet juice should NOT be processed into refined sugar Essay
Questions 128. Saalfrank Corporation is considering two alternatives that are
code-named M and N. Costs associated with the alternatives are listed below: Alternative MAlternative NSupplies costs………$43,000$53,000Assembly costs……$43,000$56,000Power costs…………$26,000$26,000Inspection costs…..$19,000$26,000 Required: a.
Which costs are relevant and
which are not relevant in the choice between these two alternatives?b.
What is the differential cost
between the two alternatives? 129. Costs associated with two alternatives, code-named Q and R, being
considered by Albiston Corporation are listed below: Alternative QAlternative RSupplies costs………$65,000$65,000Power costs…………$30,000$29,000Inspection costs…..$18,000$29,000Assembly costs……$33,000$33,000 Required: a.
Which costs are relevant and
which are not relevant in the choice between these two alternatives?b.
What is the differential cost
between the two alternatives? 130. The most recent monthly income statement for Benner Stores is given
below: TotalStore AStore BSales…………………………….$1,000,000$400,000$600,000Variable expenses………….. 580,000 160,000 420,000Contribution
margin……….420,000240,000180,000Traceable fixed
expenses… 300,000 100,000 200,000Store segment
margin……..120,000140,000(20,000)Common fixed
expenses… 50,000 20,000 30,000Net operating
income……..$ 70,000$120,000($ 50,000) Due to its poor
showing, consideration is being given to closing Store B. Studies show that if
Store B is closed, one-fourth of its traceable fixed expenses will continue
unchanged. The studies also show that closing Store B would result in a 10
percent decrease in sales in Store A. The company allocates common fixed
expenses to the stores on the basis of sales dollars. Required: Compute the overall
increase or decrease in the company’s operating income if Store B is closed. 131. Companies often allocate common fixed costs among segments. For
example, common fixed corporate costs are often allocated to divisions and
appear as part of the divisional performance reports. Required: What dangers are
there in allocating common fixed costs to segments when involved in a decision
to possibly drop a segment such as a product or a division? 132. The management of Schmader Corporation is considering dropping
product M12C. Data from the company’s accounting system appear below: Sales………………………………………………………..$550,000Variable expenses……………………………………..$242,000Fixed
manufacturing expenses……………………$215,000Fixed selling and
administrative expenses…….$132,000 All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $137,000 of the fixed
manufacturing expenses and $79,000 of the fixed selling and administrative
expenses are avoidable if product M12C is discontinued. Required: a.
What is the net operating
income earned by product M12C according to the company’s accounting system?
Show your work!b.
What would be the effect on the
company’s overall net operating income of dropping product M12C? Should the
product be dropped? Show your work! 133. Suire Corporation is considering dropping product D14E. Data from
the company’s accounting system appear below: Sales………………………………………………………..$340,000Variable expenses……………………………………..$156,000Fixed
manufacturing expenses……………………$116,000Fixed selling and
administrative expenses…….$75,000 All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $72,000 of the fixed manufacturing
expenses and $48,000 of the fixed selling and administrative expenses are
avoidable if product D14E is discontinued. Required: a.
According to the company’s
accounting system, what is the net operating income earned by product D14E?
Show your work!b.
What would be the effect on the
company’s overall net operating income of dropping product D14E? Should the
product be dropped? Show your work! 134. The management of Wengel Corporation is considering dropping
product B90D. Data from the company’s accounting system appear below: Sales………………………………………………………..$720,000Variable expenses……………………………………..$374,000Fixed
manufacturing expenses……………………$245,000Fixed selling and
administrative expenses…….$209,000 All fixed expenses
of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $173,000 of the fixed
manufacturing expenses and $150,000 of the fixed selling and administrative
expenses are avoidable if product B90D is discontinued. Required: What would be the
effect on the company’s overall net operating income if product B90D were
dropped? Should the product be dropped? Show your work! 135. Foubert Company makes 40,000 units per year of a part it uses in
the products it manufactures. The unit product cost of this part is computed as
follows: Direct materials………………………………$13.80Direct labor……………………………………18.10Variable
manufacturing overhead……..4.30Fixed
manufacturing overhead………… 24.60Unit product cost……………………………$60.80 An outside supplier
has offered to sell the company all of these parts it needs for $51.80 a unit.
If the company accepts this offer, the facilities now being used to make the
part could be used to make more units of a product that is in high demand. The
additional contribution margin on this other product would be $268,000 per
year. If the part were
purchased from the outside supplier, all of the direct labor cost of the part
would be avoided. However, $17.00 of the fixed manufacturing overhead cost
being applied to the part would continue even if the part were purchased from
the outside supplier. This fixed manufacturing overhead cost would be applied
to the company’s remaining products. Required: a.
How much of the unit product
cost of $60.80 is relevant in the decision of whether to make or buy the part?b.
What is the net total dollar
advantage (disadvantage) of purchasing the part rather than making it?c.
What is the maximum amount the
company should be willing to pay an outside supplier per unit for the part if
the supplier commits to supplying all 40,000 units required each year?
