Ashvin Required InformationEX 14-37 (Algo) Special Order (LO 14-4, 14-5)[The following information applies to the questions displayed below.]Intercontinental's special order requires 1,700 kilograms of genatope, a solidchemical regularly used in the company's products. The current stock ofgenatope is 9,200 kilograms at a book value of 8.70 p per kilogram. If thespecial order is accepted, the firm will be forced to restock genatope earlierthan expected, at a predicted cost of 9.30 p per kilogram. Without the specialorder, the purchasing manager predicts that the price will be 8.90 p whennormal restocking takes place. Any order of genatope must be in the amountof 6,900 kilograms.EX 14-37 (Algo) Part 2: Identify the relevance of each of the figures given.2. Identify the relevance of each of the figures given in the exercise in terms of making thespecial-order decision.(a) Book value of inventory(b) Quantity to be used in the special order(c) Predicted cost if next order is placed early(d) Predicted cost if next order is placed on time

Irrelevant costs are historical and have little bearing on the decision-making process, whereas…

Answered: Intercontinental's special order…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid s0.10 per part, given a forecast you provided of 100,000 parts in year 1, 300.000 in year 2; and 500.000 in year 3. Shipping and handiling of parts from the supplier's factory is estimated at $0.02 per unit. Additional inventory handling charges should amount to $0.004 per unit. Finally, administrative costs are estimated at $10 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.013 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $40,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…
Intercontinental’s special order also requires 1,000 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 8,000 kilograms at a book value of 8.10 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 8.70 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 8.30 p when normal restocking takes place. Any order of genatope must be in the amount of 5,000 kilograms. Required:1. What is the relevant cost of genatope?2. Discuss each of the figures in the exercise in terms of its relevance to the decision.
Saved Help Save Required information [The following information applies to the questions displayed below.] Intercontinental's special order requires 1,400 kilograms of genatope, a solid chemical regularly used in the company's products. The current stock of genatope is 9,600 kilograms at a book value of 8.40 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 9.00 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 8.60 p when normal restocking takes place. Any order of genatope must be in the amount of 5,000 kilograms. Required: 1. What is the relevant cost of genatope? (Enter your answer in pesos.) Total relevant cost 3 4
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally,administrative costs are estimated at $20 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…
Product A is normally sold for $40 per unit. A special price of $34 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 14% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. a. Prepare a differential analysis dated March 16 on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. If an amount is zero, enter "0". Differential AnalysisReject Order (Alt. 1) or Accept Order (Alt. 2)March 16 RejectOrder(Alternative 1) AcceptOrder(Alternative 2) DifferentialEffects(Alternative 2) Revenues, per unit $fill in the blank 9f235405f072fb5_1 $fill in the blank 9f235405f072fb5_2 $fill in the blank 9f235405f072fb5_3 Costs: Variable manufacturing costs, per unit fill in the blank 9f235405f072fb5_4 fill in the blank 9f235405f072fb5_5 fill in the blank 9f235405f072fb5_6 Export…
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 58,000 Rets per year. Costs associated with this level of production and sales are as follows: Unit Direct materials Direct labour $25.00 18.00 13.00 Total $1,450,000 1,044,000 754,000 1,102,000 19.00 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense 4.00 232,000 348,000 6.00 Total cost $ 85.00 $4,930,000 The Rets normally sell for $90 each. Fixed manufacturing overhead is constant at $1,102,000 per year within the range of 33,000 through 58,000 Rets per year. Required: 1. Assume that, due to a recession, Polaski Company expects to sell only 33,000 Rets through regular channels next year. A large retail chain has offered to purchase 25,000 Rets if Polaski is willing to accept a price lower than the regular $90. There would be no sales commissions on this order; thus, variable selling expenses would be…
Study the scenario and complete the question that follows:Jojo LtdJojo Ltd manufactures products Abbisha and Babbisha from raw material Zaro. The raw material isimported at a cost of R15 per kilogram from Garwe Limited, a foreign company. As a result of a fire thatdestroyed the warehouse of the supplier, the 2020 import of Zaro will be limited to 80% of the quantityimported in 2019.Following the restrictions on raw material imports, labour hours will, according to estimate, reduce by10 000 hours in comparison to those worked in 2019. The management of the company, however, hasdecided to maintain a minimum wage rate of R6 per hour.The following is an extract from the budget for the 2020 financial year based on 95% of the availablemachine hours. ABISHA BABISHA Sales volume in units 12000 16000 Sales volume in rands R348000 R512000 R R Standards per unit Raw material-Zaro 12.00 7.50 Labour 4.50 3.00 Overheads 3.00 5.00 The budgeted fixed manufacturing…
The selling price per unit is OMR 13. The above figures are for an output of 85,000 units, the capacity of the firm is 100,000 units. A foreign customer is desirous of buying 15,000 units at a price of OMR 10.50 per unit. (A) Advise the manufacturer, whether the order should be accepted. (B) What will be your advice, if the orders were from a local merchant, at the same price? (C) What would be the profits, if the local selling price falls to OMR 11 from OMR 13, after acceptance of the order from a local merchant?
E7-7 (Algo) Analyzing Make-or-Buy Decision [LO 7-2, 7-4] MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Company (MLC) to produce 10,000 units of the module per year for $16.00 each. The following information pertains to MSI's production of the control modules: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit $ 9 3 3 7 $ 22 MSI has determined it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. Required: 1. Compute the difference in cost between making and buying the control module. 2. Should MSI buy the modules from MLC or continue to make them? 3-a. Suppose the MSI space currently used for the modules could be…
Global Sales, Inc. (GSI) is a hypothetical distributor of consumer products, includingbars of violet essence soap. Th e soap is sold by the kilogram. GSI began operations in2009, during which it purchased and received initially 100,000 kg of soap at 110 yuan/kg, then 200,000 kg of soap at 100 yuan/kg, and finally 300,000 kg of soap at 90 yuan/kg. GSI sold 520,000 kg of soap at 240 yuan/kg. GSI stores its soap in its warehouse sothat soap from each shipment received is readily identifiable. During 2009, the entire100,000 kg from the first shipment received, 180,000 kg of the second shipment received, and 240,000 kg of the final shipment received was sent to customers. Answers tothe following questions should be rounded to the nearest 1,000 yuan.1. What are the reported cost of sales, gross profit, and ending inventory balances for2009 under the specific identification method?2. What are the reported cost of sales, gross profit, and ending inventory balances for2009 under the weighted…
Reliance Fresh is sourcing electric tandoori ovens from Panasonic for its Indian retail operations. The two parties have negotiated a wholesale supply price of $310/unit. The expected demand distribution for the tandoori ovens is given below. Reliance plans a selling price of $430/unit, ovens unsold after 6 months will be sold at a clearance price of $215/unit. What is the expected Reliance Fresh profit if the wholesale order quantity is 5300 units? Integer answer. DEMAND PROBABILITY 4,296 4,419 4,898 5,057 5,388 5,554 6,264 In the above problem, Panasonic's variable cost is $121/unit and the fixed production cost is $207,935. What is Panasonic's (manufacturer) profit? Integer answer. 6% 14% 21% 28% 22% 9% 5%
....... Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce 196,000 tires. Miramar presently produces and sells 150,000 tires for the North American market at a price of $95.00 per tire. Miramar is evaluating a special order from a South American automobile company, Rio Motors. Rio Motors is offering to buy 23,000 tires for $75.75 per tire. Miramar's accounting system indicates that the total cost per tire is as follows: Direct materials Direct labor Factory overhead (60% variable) $36 13 22 Selling and administrative expenses (30% variable) 19 $90 < Total Miramar pays a sales commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $5.00 per tire. In addition, Rio has made the order…

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