Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 10E
To determine
The reasons on whether agreeing with the president’s conclusion.
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The fastener division of Southern Fasteners manufactures zippers and then sells them to customers for $7.80 per unit. Its variable cost
is $2.97 per unit, and its fixed cost per unit is $1.55. Management would like the fastener division to transfer 11,200 of these zippers to
another division within the company at a price of $2.97. The fastener division could avoid $0.43 per zipper of variable packaging costs
by selling internally. Determine the minimum transfer price.
(a)
Assuming the fastener division is not operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.)
Minimum transfer price
$
(b)
Assuming the fastener division is operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.)
Minimum transfer price
$
ces
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three
products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of
customers. Data from the most recent period concerning these products appear below:
Annual sales volume
Unit selling price
Variable expense per unit
Contribution margin per unit
Velero
102,400
$ 1.65
$ 1.25
$ 0.40
Motal
204,800
$ 1.50
$ 0.70
$ 0.80
Nylon
409,600
$ 0.85
$ 0.25
$ 0.60
Total fixed expenses are $409,600 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped,
$80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $249,600
consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going
out of business entirely.
The company's managers would…
Exercise 6-11A (Static) Establishing price for an outsourcing decision LO 6-3
Levesque Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the
engines from a reliable manufacturer. The annual costs of making the engines are shown here.
Cost of materials (20,000 units × $26)
Labor (20,000 units × $20)
Depreciation on manufacturing equipment*
Salary of supervisor of engine production
Rental cost of equipment used to make engines
Allocated portion of corporate-level facility-sustaining costs
Total cost to make 20,000 engines
*The equipment has a book value of $90,000 but its market value is zero.
Required
a. Determine the maximum price per unit that Levesque would be willing to pay for the engines.
b. Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000
units.
Note: For all requirements, round intermediate and final answers to 2 decimal places.
a. Maximum…
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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- Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,700 3,400 8,700 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.50 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost a. Should Rooney continue to make the containers? b. Total avoidable cost Yes b. Should Rooney continue to make the…arrow_forwardProduct Pricing and Profit Analysis with Bottleneck Operations Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $12 per process hour. The fixed cost is $437,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 3,000 3,000 3,000 Total process hours per unit 17 15 12 Furnace hours per unit 3 5 4 Unit selling price $332 $295 $290 Direct materials cost per unit $113 $105 $98 The furnace operation is part of the total process for each of these three products. Thus, for example,…arrow_forwardProduct Pricing and Profit Analysis with Bottleneck Operations Hercules Steel Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $15 per process hour. The fixed cost is $200,000. In addition, the cost analyst was able to determine the following information about the three products: HighGrade Good Grade Regular Grade Budgeted units produced 5,000 5,000 5,000 Total process hours per unit 12 11 10 Furnace hours per unit 4 3 2.5 Unit selling price $280 $270 $250 Direct materials cost per unit $90 $84 $80 The furnace operation is part of the…arrow_forward
- Problem 6-28 (Static) Companywide and Segment Break-Even Analysis [LO6-5] Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: ok Annual sales volume Unit selling price ht Variable expense per unit nces Contribution margin per unit Velcro 100,000 Metal 200,000 Nylon 400,000 $ 1.65 $ 1.50 $ 0.85 $ 1.25 $ 0.70 $ 0.40 $ 0.80 $ 0.25 $ 0.60 Total fixed expenses are $400,000 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $240,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could…arrow_forwardProduct Pricing and Profit Analysis with Bottleneck Operations Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $14 per process hour. The fixed cost is $380,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 3,000 3,000 3,000 Total process hours per unit 16 14 11 Furnace hours per unit 5 3 4 Unit selling price $373 $307 $300 Direct materials cost per unit $114 $105 $98 The furnace operation is part of the total process for each of these three products. Thus, for example, 5 of…arrow_forwardProduct Pricing and Profit Analysis with Bottleneck Operations Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $10 per process hour. The fixed cost is $505,000. In addition, the cost analyst was able to determine the following information about the three products: High Grade Good Grade Regular Grade Budgeted units produced 5,000 5,000 5,000 Total process hours per unit 14 12 9 Furnace hours per unit 4 3 5 Unit selling price $274 $233 $245 Direct materials cost per unit $110 $107 $95 The furnace operation is part of the total process for each of these three products. Thus, for example, 4 of…arrow_forward
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- Question 4 Loh Gear Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials $150 Direct labor 70 Variable overhead (70% of direct labor) 49 Fixed overhead (30% of direct labor) 21 The unassembled bikes are sold to retailers at $400 each. Loh Gear currently has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity can be used to assemble the bikes and sell them at $440 each. Assembling the bikes will increase direct materials by $10 per biked, and direct labor by $10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes. Instructions (a) Prepare an incremental analysis for the sell-or-process-further decision. (b) Should Loh Gear sell or process further? Why or why not?arrow_forwardChapter 7 Problem Solution 1 Please select the correct answer and solve and explain. "Goodstone Tire Corp sells tires for $90 each. Per unit costs associated with producing and selling the tires are: Direct Materials $35 Direct Labor $10 Factory Overhead $20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming Goodstone has excess capacity: 1) The incremental profit from special order will be $12,000 2) The incremental loss from the special order will be $25,000 3) The will be no incremental loss or profit from the special orderarrow_forwardOutsourcing Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 25% of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit 5,300 $ 106.00 No Direct materials per unit 23.00 ? Direct labor per unit 18.00 ? Variable manufacturing overhead per unit 14.00 Yes Fixed…arrow_forward
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