Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 11, Problem 24P
Requirement - 1:
To determine
Continue or Discontinue: For making decision about continuing or discontinuing a particular plant, we need to know the impact of that particular plant on the overall operating profits. So when overall operating profits are higher in case of continuing then that particular plant should be continue or vice versa.
To identify: Financial advantage (disadvantage) if Birch closes its own plant.
Requirement - 2:
To determine
To Explain: Should Birch close the plant for 2 months?
Requirement − 3:
To determine
Indifferent level: Indifferent level of units sold refers to the beak even level of units sold because at this level a company will be indifferent between closing the plant or keeping it open. In other words we can say that at this level a company will not get any financial advantage either on closing the plant or on keeping it open.
To identify: Indifferent level of units sold for closing the plant or keeping it open.
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Shutting Down or Continuing to Operate a Plant
Birch Company normally produces and sells 30,000 units of RG–6 each month. The selling price is $22 per unit, variable costs are $14 per unit, fixed manufacturing overhead costs total $150,000 per month, and fixed selling costs total $30,000 per month.
Employment-contract strikes in the companies that purchase the bulk of the RG–6 units have caused Birch Company’s sales to temporarily drop to only 8,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG–6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $45,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $8,000. Because Birch Company uses Lean Production methods, no inventories are on hand.
Required:
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Shutting Down or Continuing to Operate a Plant
Birch Company normally produces and sells 30,000 units of RG–6 each month. The selling price is $22 per unit, variable costs are $14 per unit, fixed manufacturing overhead costs total $150,000 per month, and fixed selling costs total $30,000 per month.
Employment-contract strikes in the companies that purchase the bulk of the RG–6 units have caused Birch Company’s sales to temporarily drop to only 8,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG–6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $45,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $8,000. Because Birch Company uses Lean Production methods, no inventories are on hand.
Required:
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Birch Company normally produces and sells 48,000 units of RG-6 each month. The selling price is $20 per unit, variable costs
are $10 per unit, fixed manufacturing overhead costs total $155,000 per month, and fixed selling costs total $46,000 per
month.
Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to
temporarily drop to only 10,000 units per month. Birch Company estimates that the strikes will last for two months, after which
time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing
down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $47,000 per month and
its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $13,000. Because Birch Company
uses Lean Production methods, no inventories are on hand.
Required:
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Chapter 11 Solutions
Introduction To Managerial Accounting
Ch. 11 - What is a relevant cost?Ch. 11 - Define the following terms: incremental cost,...Ch. 11 - Are variable costs always relevant costs? Explain.Ch. 11 - Prob. 4QCh. 11 - “Variable costs and differential costs mean the...Ch. 11 - Prob. 6QCh. 11 - Prentice Company is considering dropping one of...Ch. 11 - Prob. 8QCh. 11 - What is the danger in allocating common fixed...Ch. 11 - Prob. 10Q
Ch. 11 - Give at least four examples of possible...Ch. 11 - Prob. 12QCh. 11 - Define the following terms: joint products, joint...Ch. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - The Excel worksheet form that appears below is to...Ch. 11 - The Excel worksheet form that appears below is to...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 9F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Identifying Relevant Costs Syahn, AB, is a Swedish...Ch. 11 - Prob. 2ECh. 11 - Make or Buy Decision Troy Engines, Ltd,...Ch. 11 - Special Order Decision Imperial Jewelers...Ch. 11 - Volume Trade-off Decisions Outdoor Luggage, Inc.,...Ch. 11 - Prob. 6ECh. 11 - Sell or Process Further Decisions Dorsey Company...Ch. 11 - Volume Trade-Off Decisions Barlow Company...Ch. 11 - Special Order Decision Delta Company produces a...Ch. 11 - Make or Buy Decision Futura Company purchases the...Ch. 11 - Make or Buy Decision Han Products manufactures...Ch. 11 - Volume Trade-Off Decisions Benoit Company produces...Ch. 11 - Prob. 13ECh. 11 - Identification of Relevant Costs Kristen Lu...Ch. 11 - Prob. 15ECh. 11 - Identification of Relevant Costs Bill has just...Ch. 11 - Prob. 17ECh. 11 - Prob. 18PCh. 11 - Dropping or Retaining a Segment Jackson Count...Ch. 11 - Sell or Process Further Decision (Prepared from a...Ch. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Make or Buy Decision Silven Industries, which...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Close or Retain a Store Superior Markets. Inc.,...Ch. 11 - Sell or Process Further Decisions Come-Clean...Ch. 11 - Make or Buy Decisions “In my opinion, we ought to...
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