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Managerial Accounting 1B Ch23




Question;Managerial Accounting 1B;Financial;and Managerial Accounting;Chapter 23;1.;Exercise 23-2 Scrap or;rework L.O.A1;A company must decide between;scrapping or reworking units that do not pass inspection. The company has;15,000 defective units that cost $6.00 per unit to manufacture. The units can;be sold as is for $2.50 each, or they can be reworked for $4.50 each and then;sold for the full price of $9.00 each. If the units are sold as is, the;company will also be able to build 15,000 replacement units at a cost of;$6.00 each, and sell them at the full price of $9.00 each.;(1);What is the incremental income;from selling the units as scrap?(Omit the;$" sign in your response.);Incremental income;$;(2);What is the incremental income;from reworking and selling the units?(Omit;the "$" sign in your response.);Incremental income;$;(3);What must the company decide?;The units should not be reworked;re5-02-2012;2.Exercise 23-4;Decision to accept additional business or not L.O. A1;Feist Co. expects to sell 200,000;units of its product in the next period with the following results.;Sales (200,000 units);$;3,000,000;Costs and expenses;Direct;materials;400,000;Direct;labor;800,000;Overhead;200,000;Selling;expenses;300,000;Administrative;expenses;514,000;Total costs and;expenses;2,214,000;Net income;$;786,000;The company has an opportunity to;sell 20,000 additional units at $12 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 $86,000.;Calculate the combined total net;income if the company accepts the offer to sell additional units at the;reduced price of $12 per unit. (Leave no;cells blank - be certain to enter "0" wherever required. Input all;amounts as positive values. Omit the "$" sign in your response.);3.;Exercise 23-6 Make or buy decision L.O. A1;Santos Company currently;manufactures one of its crucial parts at a cost of $3.40 per unit. This cost;is based on a normal production rate of 50,000 units per year. Variable costs;are $1.50 per unit, fixed costs related to making this part are $50,000 per year;and allocated fixed costs are $45,000 per year. Allocated fixed costs are;unavoidable whether the company makes or buys the part. Santos is considering;buying the part from a supplier for a quoted price of $2.70 per unit;guaranteed for a three-year period.;Calculate the total incremental;cost of making 50,000 units. (Omit the;$" sign in your response.);Total incremental cost;Calculate the total incremental;cost of buying 50,000 units. (Omit the;$" sign in your response.);Total incremental cost;Should the company continue to;manufacture the part, or should it buy the part from the outside supplier?;4.Exercise 23-8 Sell;or process decision L.O. A1;Cantrell Company has already;manufactured 20,000 units of Product A at a cost of $20 per unit. The 20,000;units can be sold at this stage for $500,000. Alternatively, the units can be;further processed at a $300,000 total additional cost and be converted into;4,000 units of Product B and 8,000 units of Product C. Per unit selling price;for Product B is $75 and for Product C is $50.;1.;Calculate the Incremental Net;Income (or loss) if processed further.(Negative;amount should be indicated by a minus sign. Omit the "$" sign in;your response.);Incremental net income;(or loss);2.;Indicate whether the 50,000 units;of Product A should be processed further or not.;5.Exercise 23-12;Sales mix determination and analysis L.O. A1;Bethel Company owns a machine that;can produce two specialized products. Production time for Product TLX is two;units per hour and for Product MTV is five units per hour. The machine?s;capacity is 2,200 hours per year. Both products are sold to a single customer;who has agreed to buy all of the company?s output up to a maximum of 3,750;units of Product TLX and 2,000 units of Product MTV. Selling prices and;variable costs per unit to produce the products follow.;Product;TLX;Product;MTV;Selling price per unit;$;12.50;$;7.50;Variable costs per;unit;3.75;4.50;1.;Determine the company's most;profitable sales mix.;Product TLX;Product MTV;2.;Determine the contribution margin;that results from that sales mix.(Do not;round your cost per unit rate, round your intermediate and final answer to;the nearest dollar amount. Omit the "$" sign in your response.);Contribution margin;Problem 23-6A Analysis;of possible elimination of a department L.O. A1;[The following information applies to the questions displayed;below.];Home Decor Company?s management is;trying to decide whether to eliminate Department 200, which has produced;losses or low profits for several years. The company?s 2011 departmental;income statement shows the following.;In analyzing whether to eliminate;Department 200, management considers the following;a.;The company has one office worker;who earns $1,200 per week, or $62,400 per year, and four sales clerks who;each earn $1,000 per week, or $52,000 per year.;b.;The full salaries of two;salesclerks are charged to Department 100. The full salary of one salesclerk;is charged to Department 200. The salary of the fourth clerk, who works;half-time in both departments, is divided evenly between the two departments.;c.;Eliminating Department 200 would;avoid the sales salaries and the office salary currently allocated to it.;However, management prefers another plan. Two salesclerks have indicated that;they will be quitting soon. Management believes that their work can be done;by the other two clerks if the one office worker works in sales half-time.;Eliminating Department 200 will allow this shift of duties. If this change is;implemented, half the office worker?s salary would be reported as sales;salaries and half would be reported as office salary.;d.;The store building is rented under;a long-term lease that cannot be changed. Therefore, Department 100 will use;the space and equipment currently used by Department 200.;e.;Closing Department 200 will;eliminate its expenses for advertising, bad debts, and store supplies, 70% of;the insurance expense allocated to it to cover its merchandise inventory, and;25% of the miscellaneous office expenses presently allocated to it.;6.;Problem 23-6A Part 1;Required;1.;Complete the three-column report;that lists items and amounts for (a) the company?s total expenses (including;cost of goods sold)?in column 1, (b) the expenses that would be eliminated by;closing Department 200?in column 2, and (c) the expenses that will;continue?in column 3.(Leave no cells blank -;be certain to enter "0" wherever required. Omit the "$;sign in your response.);7.Problem 23-6A Part 2;2.;Complete the forecasted annual;income statement for the company reflecting the elimination of Department 200;assuming that it will not affect Department 100?s sales and gross profit. The;statement should reflect the reassignment of the office worker to one-half;time as a salesclerk.(Input all amounts as;positive values. Omit the "$" sign in your response.)


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