Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 7E
To determine
Whether Company K accept or reject the special order.
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Homework, Chapter 25
Make-or-Buy Decision
Somerset Computer Company has been purchasing carrying cases for its portable
computers at a purchase price of $24 per unit. The company, which is currently
operating below full capacity, charges factory overhead to production at the rate of 40%
of direct labor cost. The unit costs to produce comparable carrying cases are expected to
be as follows:
Direct materials
$8.00
Direct labor
12.00
Factory overhead (40% of direct labor)
4.80
Total cost per unit
$24.80
If Somerset Computer Company manufactures the carrying cases, fixed factory overhead
costs will not increase and variable factory overhead costs associated with the cases are
expected to be 25% of the direct labor costs.
a. Prepare a differential analysis dated April 30 to determine whether the company
should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is
zero, enter "0". If required, round your answers to two decimal places.
Differential Analysis
Make…
PROBLEM 14 (SPECIAL ORDER)
The waterbed company manufactures several types of waterbeds expecting a jump in demand for its product. The
company built a large plant with 1,250 units that currently is being utilized at 80% of capacity. A salesman brings in an offer
from a large motel chain to purchase 200 heated king-size waterbeds for a price of Rs.550 each. Normal selling price for the
bed is Rs.1,200 each. The schedule of the present costs of the king-size waterbeds for the current year's production was as
follows: Acceptance of the order would cause no increase in any fixed cost.
Costs for 1000 Units
Unit Cost
Direct Materials
Rs. 3,00,000
Rs. 300
Direct Labour
1,00,000
100
Manufacturing Overhead (40% variable)
2,00,000
200
Marketing (1/3 variable)
Administrative (10% variable)
3,00,000
300
1,00,000
100
Total
Rs.10,00,000
Rs.1,000
Required: (a) Should the company accept the offer?
(b) Would your answer to be change if sales commission of Rs. 50 a bed could be eliminated on this…
QUESTION 5
Apollonia Company is part of an HMO that operates in a large Metropolitan area. Currently,
Apollonia has its own dental laboratory to produce varieties of porcelain crowns. The selling
price of the crown is $150 and the unit costs to produce the crowns are as follows:
$
Direct materials
Direct labour
Variable manufacturing overhead
Variable marketing expenses
4
Fixed manufacturing overhead
Total costs
Manager of company, Jane has enough idle capacity to accept a one time only special order
from Tom for 20,000 units of crown at $76 per unit. Jane will not incur any variable
marketing expenses for the order.
a. Evaluate above case above to determine whether Green Jane should accept the
order. Supporting workings with calculations.
b. In addition to the special order's effect on profits, determine the FIVE (5) factors
should Jane's manager consider in deciding whether to accept the order.
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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