Managerial Accounting
5th Edition
ISBN: 9781259176494
Author: John J Wild, Ken Shaw Accounting Professor
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 6E
To determine
Concept introduction:
Managerial Decision:
Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager’s decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.
Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.
Two basic types of the relevant costs are as follows:
- Out-of-pocket costs
- Opportunity costs
The Incremental income from selling units in scrap and from reworking and then selling and the decision.
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A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each and sell them at the full price of $8.50 each. (1) What is the incremental income from selling the units as scrap? (2) What is the incremental income from reworking and selling the units? (3) Should the company sell the units as scrap or rework them?
A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each, and sell them at the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
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Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 1DQCh. 10 - Is nonfinancial information ever useful in...Ch. 10 - What is a relevant cost? Identify the two types of...Ch. 10 - Prob. 4DQCh. 10 - Prob. 5DQ
Ch. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Signal mistakenly produced 1,000 defective cell...Ch. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Rory Company has a machine with a book value of...Ch. 10 - Fill in each of the blanks below with the correct...Ch. 10 - Prob. 2ECh. 10 - Goshford Company produces a single product and has...Ch. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Suresh Co. expects its five departments to yield...Ch. 10 - Exercise 23-11 Sales mix A1 Childress Company...Ch. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 1PSACh. 10 - Calla Company produces skateboards that sell for...Ch. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Elegant Decor Companys management is trying to...Ch. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Esme Companys management is trying to decide...Ch. 10 - Prob. 10SPCh. 10 - Apple currently chooses to buy (mainly from...Ch. 10 - Prob. 3BTNCh. 10 - Assume that you work for Greebles Department...Ch. 10 - Prob. 5BTNCh. 10 - Prob. 6BTNCh. 10 - Prob. 7BTNCh. 10 - Prob. 8BTNCh. 10 - Prob. 9BTN
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