Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 10.11DMP
To determine
Research and development costs:
Research and development costs refers to the expenditures spent on research, development, improvement or introduction of new products, processes, a new patent or even a copyright, that a company expects to get benefits.
Property, Plant, and Equipment:
Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.
To write: A memo to Person S explaining the GAAP (Generally Accepted Accounting Principles) relevant to the stated issue.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Homwork Question 6
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 Co. (MLC) to produce 10,000 units of the module per year for $16 each. The following information pertains to MSI’s production of the control modules: Direct materials $9Direct labor $4Variable manufacturing overhead $2Fixed manufacturing overhead $3Total cost per unit $18
MSI has determined that 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.
1. Compute the difference in cost between making and buying the control module.
PROBLEM 11A-4 Transfer Price with an Outside Market [LO11–5]
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the pro-
duction of various paper goods. Revenue and costs associated with a ton of pulp follow:
Selling price
Expenses:
$70
Variable
$42
Fixed (based on a capacity of
50,000 tons per year)
18
60
Net operating income
$10
Hrubec Products has just acquired a small company that manufactures paper cartons. This
company will be treated as a division of Hrubec with full profit responsibility. The newly formed
Carton Division is currently purchasing 5,000 tons of pulp per year from a supplier at a cost of $70
per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to
begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out.
Required:
For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers
for $70 per ton.
Are the managers of…
Exercise 11-10 Make or Buy Decision [L011-3]
Futura Company purchases the 50,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.70
per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than
buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the
production cost per unit is $11.90 as shown below:
Per Unit
$ 5.00
3.20
Total
Direct materials
Direct labor
Supervision
Depreciation
Variable manufacturing overhead
1.80 $ 90,000
1.00
0.50
$ 50,000
Rent
0.40
$ 20,000
Total production cost
$11.90
If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $90,000) to oversee production. However,
the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above
is based on space utilized in the plant. The total rent…
Chapter 10 Solutions
Intermediate Accounting, 10 Ed
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Prob. 10.8BECh. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.18BECh. 10 - Prob. 10.19BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.21BECh. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.30ECh. 10 - Prob. 10.31ECh. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.1PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6DMPCh. 10 - Prob. 10.7DMPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9DMPCh. 10 - Prob. 10.11DMPCh. 10 - Prob. 10.13DMPCh. 10 - Prob. 10.15DMPCh. 10 - Prob. 10.16DMP
Knowledge Booster
Similar questions
- AIP 10.4 Allocating the Cost of Scrap LO 6 ITI Technology designs and manufactures solid-state computer chips. In one of its production departments, a 6-inch circular wafer is fabricated by laying down successive layers of silicon and then etching circuits into the layers. Each wafer contains 100 separate solid-state computer chips. After a wafer is manufactured, the 100 chips are cut out of the wafer, initially tested, mounted into protective covers and electrical leads attached. A final quality control test is then performed. The initial testing process consists of successive stages of heating and cooling the chips and testing how they work. If 99 percent of each chip's circuits work properly after the testing, it is classified as a high-density (HD) chip. If between 75 percent and 99 percent of a chip's circuits work properly, it is classified as a low-density (LD) chip. If fewer than 75 percent of the circuits work, it is discarded. Twenty wafers are manufactured 495 per batch. In…arrow_forwardExercise 11-11 Make or Buy Decision [LO11-3] Han Products manufactures 20,000 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 $ 3.40 8.00 2.60 Variable manufacturing overhead Fixed manufacturing overhead 9.00 $23.00 Total cost per part An outside supplier has offered to sell 20,000 units of part S-6 each year to Han Products for $19 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 $70,000. 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: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?arrow_forwardProblem 10-14 Measures of Internal Business Process Performance [LO10-3] DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Month 1 2 4 Throughput time (days) ? ? ? Delivery cycle time (days) ? ? ? ? ? ? ? ? Manufacturing cycle efficiency (MCE) Percentage of on-time deliveries Total sales (units) 2060 1972 1871 1800 Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Average per Month (in days) 1 2 3 4 Move time per unit 0.7 0.4 0.5 0.5 Process time per unit…arrow_forward
- Page 266 MINICASE Flowton Products enjoys a steady demand for stainless steel infiltrators used in a number of chemical processes. Revenues from the infiltrator division are $50 million a year, and production costs are $47.5 million. However, the 10 high-precision Munster stamping machines that are used in the production process are coming to the end of their useful life. One possibility is simply to replace each existing machine with a new Munster. These machines would cost $800,000 each and would not involve any additional operating costs. The alternative is to buy 10 centrally controlled Skilboro stampers. Skilboros cost $1.25 million each, but compared with the Munster, they would produce a total saving in operator and material costs of $500,000 a year. Moreover, the Skilboro is sturdily built and would last 10 years, compared with an estimated seven-year life for the Munster. Analysts in the infiltrator division have produced the accompanying summary table, which shows the…arrow_forwardQuestion 7 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardQuestion 17 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forward
- Question 11 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardQuestion 23 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardPROBLEM 11A-4 Transfer Price with an Outside Market [LO11-5] Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the pro- duction of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price . Expenses: $70 Variable .. $42 Fixed (based on a capacity of 50,000 tons per year) . 18 60 Net operating income $10 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 5,000 tons of pulp per year from a supplier at a cost of $70 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out.arrow_forward
- Question 22 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardQuestion 5 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardAIP 6.11 Transfer Price LO 6 UK Pumps is a multi-divisional firm that manufactures and installs chemical piping and pump systems. The Valve Division makes a single standardized valve. Two divisions, the Valve Division and the Installation Division, are currently involved in a transfer-pricing dispute. Last year, half of the Valve Division's output was sold to the Installation Division for £40 and the remaining half was sold to outsiders for £60. The existing transfer price of £40 per pump has been set through a negotiation process between the two divisions and also with the involvement of senior management. The Installation Division has received a bid from an outside valve manufacturer to supply it with an equivalent valve for £35 each. The manager of the Valve Division has argued that if it is forced to meet the external price of £35, it will lose money on internal sales. The operating data for last year for the Valve Division are as follows: Valve Division Operating Statement Last…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE L
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L