Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 6, Problem 6.11E
Exercise 6.11
LO 3
Effect of
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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…
Question 10.4
Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product.
Variable manufacturing costs/unit
$925
Fixed costs/unit at capacity
$275
Selling price/unit
$1,800
The capacity of the plant is 2,500 units per year.
Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units.
The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000.
Required:
How many units must Division Y sell in order…
Problem#3
The Bach Company produces pffice chairs. The price of the chairs is $99.75 and the variable cost
chair is $49.75 the following fixed cost is incurred:
Depreciation of plant and equipment per year $20,000
Property Tax per year
Variable Overhead
$12,000
$5,200
Perform breakeven analysis of this company:
b) What is the total cost function?
c) What is the profit function?
d) What is the breakeven point in units in number of chairs?
e) What is the revenue ate the breakeven point?
f) Estimate the profit when 1500 chairs are produced in a year?
g) How many chairs must be sold for the company to make $750000 in a year?
Chapter 6 Solutions
Accounting: What the Numbers Mean
Ch. 6 - Prob. 6.1MECh. 6 - Prob. 6.2MECh. 6 - Mini-Exercise 6.3 LO 3 Depreciation calculation...Ch. 6 - Prob. 6.4MECh. 6 - Mini-Exercise 6.5 LO 9 Goodwill Backstreets Co....Ch. 6 - Prob. 6.6MECh. 6 - Exercise 6.7 LO 1 Basket purchase allocation...Ch. 6 - Prob. 6.8ECh. 6 - Prob. 6.9ECh. 6 - Prob. 6.10E
Ch. 6 - Exercise 6.11 LO 3 Effect of depreciation on ROI...Ch. 6 - Exercise 6.12 LO 3 Financial statement effects of...Ch. 6 - Exercise 6.13 LO 3 Depreciation calculation...Ch. 6 - Exercise 6.14 LO 3 Depreciation calculation...Ch. 6 - Prob. 6.15ECh. 6 - Prob. 6.16ECh. 6 - Prob. 6.17ECh. 6 - Exercise 6.18 LO 9 Goodwill-effect on ROI and...Ch. 6 - Exercise 6.19 LO 6, 8, 9 Transaction...Ch. 6 - Exercise 6.20 LO 3, 4, 6, 8 Transaction...Ch. 6 - Prob. 6.21PCh. 6 - Prob. 6.22PCh. 6 - Prob. 6.23PCh. 6 - Problem 6.24 LO 3 Partial-year depreciation...Ch. 6 - Problem 6.25
LO 3
Identify depreciation methods...Ch. 6 - Prob. 6.26PCh. 6 - Prob. 6.27PCh. 6 - Prob. 6.28PCh. 6 - Prob. 6.29PCh. 6 - Prob. 6.30PCh. 6 - Prob. 6.31PCh. 6 - Prob. 6.32PCh. 6 - Prob. 6.33CCh. 6 - Prob. 6.34CCh. 6 - Case 6.35 LO 3, 6 Capstone analytical review of...
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