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##### BMAL530 Assignment: Homework 8 FALL 2014

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Question;1.;award:6 out of;6.00 points;Xinhong;Company is considering replacing one of its manufacturing machines. The;machine has a book value of \$37,000 and a remaining useful life of 4 years;at which time its salvage value will be zero. It has a current market value;of \$47,000. Variable manufacturing costs are \$33,500 per year for this;machine. Information on two alternative replacement machines follows.;Alternative A;Alternative B;Cost;\$;116,000;\$;110,000;Variable;manufacturing costs per year;22,500;10,200;2.;award:6 out of;6.00 points;A;company must decide between scrapping or reworking units that do not pass;inspection. The company has 17,000 defective units that cost \$5.70 per unit;to manufacture. The units can be sold as is for \$2.50 each, or they can be;reworked for \$3.50 each and then sold for the full price of \$9.50 each. If;the units are sold as is, the company will be able to build 17,000 units at a;cost of \$5.70 each, and sell them at the full price of \$9.50 each.;(1);What is;the incremental income from selling the units as scrap and reworking and;selling the units?.;award:6 out of;6.00 points;Farrow;Co. expects to sell 300,000 units of its product in the next period with the;following results.;Sales;(300,000 units);\$;4,500,000;Costs;and expenses;Direct;materials;600,000;Direct;labor;1,200,000;Overhead;300,000;Selling;expenses;450,000;Administrative;expenses;771,000;Total;costs and expenses;3,321,000;Net;income;\$;1,179,000;The;company has an opportunity to sell 30,000 additional units at \$13 per unit.;The additional sales would not affect its current expected sales. Direct;materials and labor costs per unit would be the same for the additional units;as they are for the regular units. However, the additional volume would;create the following incremental costs: (1) total overhead would increase by;15% and (2) administrative expenses would increase by \$129,000.;Calculate;the combined total net income if the company accepts the offer to sell;additional units at the reduced price of \$13 per unit.;4.;award:6 out of;6.00 points;Gilberto;Company currently manufactures one of its crucial parts at a cost of \$4.85;per unit. This cost is based on a normal production rate of 60,000 units per;year. Variable costs are \$3.10 per unit, fixed costs related to making this;part are \$60,000 per year, and allocated fixed costs are \$45,000 per year.;Allocated fixed costs are unavoidable whether the company makes or buys the;part. Gilberto is considering buying the part from a supplier for a quoted;price of \$3.50 per unit guaranteed for a three-year period.;Calculate;the total incremental cost of making 60,000 units.;Calculate;the total incremental cost of buying 60,000 units.;Should;the company continue to manufacture the part, or should it buy the part from;the outside supplier?;5.;award:6 out of;6.00 points;Cobe Company has already manufactured 16,000;units of Product A at a cost of \$10 per unit. The 16,000 units can be sold;at this stage for \$440,000. Alternatively, the units can be further;processed at a \$270,000 total additional cost and be converted into 5,400;units of Product B and 12,000 units of Product C. Per unit selling price;for Product B is \$105 and for Product C is \$58.;1.;Prepare an analysis that shows whether the;16,000 units of Product A should be processed further or not.

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