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ACC - Mendenhall Pictures, Stackhouse Company wworkings

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Question;1) Mendenhall Pictures produces and prints 6,000 calendars a year. Total costs for the calendars are:Direct Materials$11,000Direct Labor15,000Variable Overhead3,000Fixed Overhead7,000Mendenhall could avoid $5,000 in fixed overhead costs if it provides the photos and has an outside supplier print the calendars. The supplier?s delivery performance and quality are acceptable. If the supplier offered to print the calendars for $6 each, how would Mendenhall?s net income change if it accepted the offer?2) Trio has three product lines. Results for the third line are:SalesVariable expensesContribution marginFixed expensesNet loss$215,000125,00090,000140,000$ (50,000)If this product line is eliminated, 80% of the fixed expenses can be eliminated and the other 20% will be allocated to other product lines. Should management eliminate this product line? Why or why not?3). Wahoo Corporation manufactures shoes with a unit variable cost of $40 and a unit sales price of$80. Fixed manufacturing costs were $90,000 when 10,000 pairs of shoes were produced and sold, or $9 per pair. Wahoo has a one-time opportunity to sell an additional 1,000 pairs at $60.a) How would Wahoo?s net income change if the special order is accepted?b) What other information should management consider in deciding whether or not to accept the order?4) Pine Products is preparing to sell rocking chairs. It can sell them to furniture companies unassembled for $66 or assemble them and sell them for $75. The cost of each chair includes $16 direct materials, $3 direct labor, and $14 manufacturing overhead. The cost of assembling each chair is estimated to be $10 of labor. Should Pine sell the chairs assembled or unassembled and why?5) Stackhouse Company is considering a capital investment of $400,000 in new equipment. It isexpected to have a useful life of 10 years with no salvage value. Depreciation is computed by thestraight-line method. During the life of the investment, annual net income and cash inflows are expected to be $35,000 and $75,000, respectively. Stackhouse requires either a 10% cost of capital, or a payback period of 7 years or less.Compute the following and state whether the project should be accepted or rejected under each method:a) cash payback period,b) net present value,c) internal rate of return (to the nearest percent), andd) annual rate of return.Show your computations.

 

Paper#40569 | Written in 18-Jul-2015

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