Multiple choice. (CPA) Choose the best answer.
- 1. The Cozy Company manufactures slippers and sells them at $10 a pair. Variable
manufacturing cost is $5.75 a pair, and allocated fixed manufacturing cost is $1.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 25,000 pairs of slippers at $7.50 a pair. Cozy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $43,750 increase, (c) $143,750 increase, or (d) $187,500 increase? Show your calculations. - 2. The Manchester Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 10,000 units of Part No. 498 is as follows:
Direct materials | $ 3 |
Variable direct manufacturing labor | 40 |
Variable manufacturing |
10 |
Fixed manufacturing overhead allocated | 21 |
Total manufacturing cost per unit | $74 |
The Remnant Company has offered to sell 10,000 units of Part No. 498 to Manchester for $71 per unit. Manchester will make the decision to buy the part from Remnant if there is an overall savings of at least $45,000 for Manchester. If Manchester accepts Remnant’s offer, $11 per unit of the fixed overhead allocated would be eliminated. Furthermore, Manchester has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575. For Manchester to achieve an overall savings of $45,000, the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No. 575 would be which of the following: (a) $30,000, (b) $115,000, (c) $125,000, or (d) $100,0007 Show your calculations. What other factors might Manchester consider before outsourcing to Remnant?
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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- Peru Company, which manufactures sneakers, has enough capacity available to accept a special order of 20,000 pairs of sneakers at Ph 6.00 a pair. The normal selling price is Ph 10.00 a pair. Variable manufacturing costs are Ph 4.50 a pair, and fixed manufacturing costs are Ph 1.50 a pair. Peru will not incur any selling expenses as a result of the special order. What could be the effect on operating income if the special order could be accepted without affecting normal sales? O Ph 0 Ph 30,000 increase Ph 90,000 increase O Ph 120,000 increasearrow_forwardMeg's Manufacturing Company can make 211 units of a component part for variable costs of $159,896 and fixed costs of $32,104. The compnay decides the buy the part externally instead for $153,734 and $4,789 of the fixed costs will be avoided. How much will net income increase or decrease? If net income increases, make your answer positive; If net income decreases, put a (-) negative sign in front of the answer. Round your answer to the nearest whole dollar and do not type the dollar sign.arrow_forwardThe Comfy Company manufactures slippers and sells them at $11 a pair. Variable manufacturing cost is a $5 pair, and allocated fixed manufacturing cost is a $3 pair. It has enough idle capacity available to accept a one-time-only special order of 5000 pairs of slippers at $8 a pair. Comfy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $15000 increase, (c) $25000 increase, or (d) $40000 increase? Show your calculations. The HoustonCompany manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 38 Variable manufacturing overhead 15 Fixed manufacturing overhead allocated 18 Total manufacturing cost per unit $75 The Cushion Company has offered to sell…arrow_forward
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