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Managerial Accounting

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BE7-1 The steps in management?s decision-making process are listed in random order;below. Indicate the order in which the steps should be executed.;Make a decision ________ Review results of the decision;Identify the problem and assign ________ Determine and evaluate possible;responsibility courses of action;BE7-2 Bogart Company is considering two alternatives. Alternative A will have revenues;of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs;of $125,000. Compare Alternative A to Alternative B showing incremental revenues, costs;and net income.;E7-1 Ortega has prepared the following list of statements about decision-making and;incremental analysis.;1. The fi rst step in management?s decision-making process is, ?Determine and evaluate;possible courses of action.?;2. The fi nal step in management?s decision-making process is to actually make the decision.;3. Accounting?s contribution to management?s decision-making process occurs primarily;in evaluating possible courses of action and in reviewing the results.;4. In making business decisions, management ordinarily considers only fi nancial information;because it is objectively determined.;5. Decisions involve a choice among alternative courses of action.;6. The process used to identify the fi nancial data that change under alternative courses of;action is called incremental analysis.;7. Costs that are the same under all alternative courses of action sometimes affect the decision.;8. When using incremental analysis, some costs will always change under alternative;courses of action, but revenues will not.;9. Variable costs will change under alternative courses of action, but fi xed costs will not.;Instructions;Identify each statement as true or false. If false, indicate how to correct the statement.;E7-4 Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its;fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very;popular as an undergarment for sports activities. Operating at capacity, the company can;produce 1,000,000 undergarments of Y-Go a year. The per unit and the total costs for an;individual garment when the company operates at full capacity are as follows.;Per Undergarment Total;Direct materials $2.00 $2,000,000;Direct labor 0.75 750,000;Variable manufacturing overhead 1.00 1,000,000;Fixed manufacturing overhead 1.50 1,500,000;Variable selling expenses 0.25 250,000;Totals $5.50 $5,500,000;The U.S. Army has approached Klean Fiber and expressed an interest in purchasing;250,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay;the unit cost for direct materials, direct labor, and variable manufacturing overhead costs.;In addition, the Army has agreed to pay an additional $1 per undergarment to cover all;other costs and provide a profi t. Presently, Klean Fiber is operating at 70% capacity and;does not have any other potential buyers for Y-Go. If Klean Fiber accepts the Army?s offer;it will not incur any variable selling expenses related to this order.;Instructions;Using incremental analysis, determine whether Klean Fiber should accept the Army?s offer.;E7-9 Rachel Rey recently opened her own basketweaving studio. She sells fi nished baskets;in addition to the raw materials needed by customers to weave baskets of their own.;Rachel has put together a variety of raw material kits, each including materials at various;stages of completion. Unfortunately, owing to space limitations, Rachel is unable to carry;all varieties of kits originally assembled and must choose between two basic packages.;The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving;one basket. This basic package costs Rachel $14 and sells for $30. The second kit;called Stage 2, includes cut reeds that have already been dyed. With this kit the customer;need only soak the reeds and weave the basket. Rachel is able to produce the second kit;by using the basic materials included in the fi rst kit and adding one hour of her own time;which she values at $18 per hour. Because she is more effi cient at cutting and dying reeds;than her average customer, Rachel is able to make two kits of the dyed reeds, in one hour;from one kit of undyed reeds. The Stage 2 kit sells for $35.;Instructions;Determine whether Rachel?s basketweaving shop should carry the basic introductory kit;with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Prepare;an incremental analysis to support your answer.

 

Paper#73943 | Written in 18-Jul-2015

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