ACCT 285 HW7(DIFFERENTIAL ANALYSIS: THE KEY TO DECISION MAKING )You will find every thing on the att

  

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7/10/2019
Chapter 7 HW
Saeed Alameri
ACCT 285: SUMMER 2019 – ONLINE
Chapter 7 HW
1.
instructions | help
value:
2.00 points
Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution format
income statement follows:
Sales
Variable expenses
Contribution margin
Fixed expenses
Total
$ 4,300,000
1,242,000
3,058,000
2,360,000
Department
Hardware
Linens
$3,100,000
$ 1,200,000
841,000
401,000
2,259,000
799,000
1,490,000
870,000
Net operating income (loss)
$
$ 769,000
698,000
$
(71,000)
A study indicates that $380,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the
Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 17% decrease in the sales of the
Hardware Department.
Required:
If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?
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Chapter 7 HW
in net operating income
References
Worksheet
eBook & Resources
Difficulty: 1 Easy
Learning Objective: 07-02 Prepare an analysis showing
whether a product line or other business segment should be
added or dropped.
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7/10/2019
Chapter 7 HW
ACCT 285: SUMMER 2019 – ONLINE
Chapter 7 HW
2.
Saeed Alameri
instructions | help
value:
2.00 points
Han Products manufactures 27,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part
S-6 is:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total cost per part
$
4.80
8.00
2.30
9.00
$ 24.10
An outside supplier has offered to sell 27,000 units of part S-6 each year to Han Products for $44.00 per part. If Han Products accepts this
offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $696,300. However,
Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6
were purchased from the outside supplier.
Required:
1. Calculate the per unit and total relevant cost for buying and making the product. (Round your “per unit” answers to 2 decimal places.)
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Chapter 7 HW
Per Unit Differential
Costs
Make
27,000 Units
Buy
Make
Buy
Cost of purchasing
Cost of making:
Direct materials
Direct labor
Variable overhead
Fixed overhead
$
Total cost
0.00
$
0.00
$
0
$
0
2. How much will profits increase or decrease if the outside supplier’s offer is accepted?
Profit would
References
Worksheet
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by
eBook & Resources
Difficulty: 1 Easy
Learning Objective: 07-03 Prepare a make or buy analysis.
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Chapter 7 HW
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Chapter 7 HW
ACCT 285: SUMMER 2019 – ONLINE
Chapter 7 HW
3.
Saeed Alameri
instructions | help
value:
2.00 points
Imperial Jewelers is considering a special order for 26 handcrafted gold bracelets to be given as gifts to members of a wedding party. The
normal selling price of a gold bracelet is $401.00 and its unit product cost is $269.00 as shown below:
Direct materials
Direct labor
Manufacturing overhead
Unit product cost
$ 146
89
34
$ 269
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $9
of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order
would like special filigree applied to the bracelets. This filigree would require additional materials costing $8 per bracelet and would also
require acquisition of a special tool costing $464 that would have no other use once the special order is completed. This order would have no
effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.
Required:
1. What effect would accepting this order have on the company’s net operating income if a special price of $361.00 per bracelet is offered for
this order? (Enter all amounts as positive values.)
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Chapter 7 HW
Per
Total 26
Unit
Bracelets
Incremental revenue
Incremental costs:
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Special filigree
$
Total variable cost
0
0
Fixed costs:
Purchase of special tool
Total incremental cost
0
Incremental net operating income (loss)
$
0
2. Should the special order be accepted at this price?
Yes
No
Hints
References
eBook & Resources
Hint #1
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Chapter 7 HW
ACCT 285: SUMMER 2019 – ONLINE
Chapter 7 HW
4.
Saeed Alameri
instructions | help
value:
2.00 points
Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit):
Selling price
Variable expenses:
Direct materials
Other variable expenses
Total variable expenses
Contribution margin
Contribution margin ratio
$
A
75
22.50
22.50
45.00
$30.00
40%
Product
B
$ 55
$
16.50
24.75
41.25
$13.75
4.55
40.95
45.50
$19.50
25%
C
65
30%
Demand for the company’s products is very strong, with far more orders each month than the company can produce with the available raw
materials. The same material is used in each product. The material costs $5 per pound with a maximum of 4,100 pounds available each
month.
Required:
1. Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal
places.)
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Chapter 7 HW
Contribution Margin per
Pound
Product A
Product B
Product C
2. Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third?
Product A
Product B
Product C
References
Worksheet
https://ezto.mheducation.com/hm.tpx
eBook & Resources
Difficulty: 1 Easy
Learning Objective: 07-05 Determine the most profitable
use of a constrained resource.
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Chapter 7 HW
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Chapter 7 HW
ACCT 285: SUMMER 2019 – ONLINE
Chapter 7 HW
5.
Saeed Alameri
instructions | help
value:
2.00 points
Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off
point total $98,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the splitoff point. Unit selling prices and total output at the split-off point are as follows:
Product
A
B
C
Selling Price
$ 5 per pound
$ 5 per pound
$ 12 per gallon
Quarterly Output
12,000 pounds
17,000 pounds
5,000 gallons
Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing
costs (per quarter) and unit selling prices after further processing are given below:
Product
A
B
C
Additional
Processing Costs
$ 42,000
$ 40,000
$ 17,000
Selling Price
$ 7 per pound
$ 9 per pound
$ 16 per gallon
Required:
a. Compute the incremental profit (loss) for each product.
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Chapter 7 HW
Product A
Product B
Product C
Selling price after further processing
Selling price at the split-off point
Incremental revenue per pound or gallon
0
0
0
0
0
0
Total quarterly output in pounds or gallons
Total incremental revenue
Total incremental processing costs
Total incremental profit or loss
$
0
$
0
$
0
b. Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a
check mark for correct answers and double click to empty the box for the wrong answers.)
Product A
Product B
Product C
c. Which product or products should be processed further? (You may select more than one answer. Single click the box with a check
mark for correct answers and double click to empty the box for the wrong answers.)
Product A
Product B
Product C
rev: 04_17_2017_QC_CS-85287
Hints
References
eBook & Resources
Hint #1
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Chapter 7 HW
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