EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Question
Chapter 23, Problem 2DIE
To determine
Relevant cost in decision making:
Decision-making is an important managerial process in which the decisions are based on the relevant cost related to the situation. The cost relevant to the decisions is the incremental cost incurred for the particular event and incurrence being controlled by the decision maker.
:
The decision on whether to accept the special order or not.
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Students have asked these similar questions
At Cullumber Electronics, it costs $30 per unit ($16 variable and $14 fixed) to make an MP3 player that normally sells for $51. A
foreign wholesaler offers to buy 3,580 units at $28 each. Cullumber Electronics will incur special shipping costs of $3 per unit.
Assuming that Cullumber Electronics has excess operating capacity, indicate the net income (loss) Cullumber Electronics would realize
by accepting the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Revenues
Costs-Variable
manufacturing
Shipping
Net income
The special order should be
$
69
accepted
Reject
Order
$
Accept
Order
4
Net Income
Increase (Decrease)
Davao has a potential foreign customer that has offered to buy 1,500 tons at P450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity?
Answer: 221,500
Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500?
Answer: 307.5
At Pharoah Electronics, it costs $33 per unit ($19 variable and $14 fixed) to make an MP3 player that normally sells for $55. A foreign
wholesaler offers to buy 3,750 units at $28 each. Pharoah Electronics will incur special shipping costs of $1 per unit. Assuming that
Pharoah Electronics has excess operating capacity, indicate the net income (loss) Pharoah Electronics would realize by accepting the
special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Revenues
Costs-Variable manufacturing
Shipping
Net income
The special order should be
LA
$
Reject
Order
LA
$
tA
Accept
Order
LA
$
$
Net Income
Increase (Decrease)
Chapter 23 Solutions
EBK ACCOUNTING PRINCIPLES
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