Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Question
Chapter 8, Problem 41E
To determine
Describe whether Company S should accept the special order or not. Also, calculate the increase or decrease in the amount of profit if the order is selected.
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The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00.
The new customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 82,000 units
but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows:
Direct materials
$3.10
Direct labor
Variable overhead
Fixed overhead
Total
1.50
1.00
1.80
$7.40
However, assume that Cool Can plans to produce and sell 70,000 units in the coming year (rather than the originally anticipated 65,000 units).
Required:
1. Using Excel (or some other spreadsheet software tool), calculate the amount by which total operating income increases or decreases if the order is accepted.
Decrease
-84,000 X
2. Conceptual Connection: Should Cool Can accept the special order when sales at the regular price are expected to…
The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new
customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 82,000 units but plans to produce and sell
only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
$3.10
1.50
1.00
1.80
$7.40
If Cool Can accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity.
Required:
Download Excel spreadsheet
1. What are the alternatives for Cool Can?
2. Conceptual Connection: Should Cool Can accept the special order?
By how much will operating income increase or decrease if the order is accepted?
3. Conceptual Connection: Briefly explain the significance of the statement in the exercise…
The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically
separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 95,000 units but plans to produce and sell only 65,000 in the coming year. The normal sale
price is $16 per unit. Unit cost information is as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead.
Total
In addition, assume that the new customer also wants to have its company logo affixed to each koozie using a label. Cool Can would have to purchase a special logo labeling machine that will cost $12,000
The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional
direct materials of $0.20
$3.10
2.50
1.15
1.00
$8.55…
Chapter 8 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 8 - What is the difference between tactical and...Ch. 8 - Prob. 2DQCh. 8 - What role do past costs play in relevant costing...Ch. 8 - Explain why depreciation on an existing asset is...Ch. 8 - Give an example of a future cost that is not...Ch. 8 - Can direct materials ever be irrelevant in a...Ch. 8 - Why would a firm ever offer a price on a product...Ch. 8 - What is a segment?Ch. 8 - Prob. 9DQCh. 8 - Discuss the importance of complementary effects in...
Ch. 8 - Prob. 11DQCh. 8 - Suppose that a product can be sold at split-off...Ch. 8 - Prob. 13DQCh. 8 - Which of the following is not a step in the...Ch. 8 - Costs that cannot be affected by any future action...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Which of the following statements is false? a....Ch. 8 - Prob. 7MCQCh. 8 - In a make-or-buy decision, a. the company must...Ch. 8 - Carroll Company, a manufacturer of vitamins and...Ch. 8 - Prob. 10MCQCh. 8 - Garrett Company provided the following...Ch. 8 - Jennings Hardware Store marks up its merchandise...Ch. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - In the sell-or-process-further decision, a. joint...Ch. 8 - Structuring a Make-or-Buy Problem Fresh Foods, a...Ch. 8 - Structuring a Special-Order Problem Harrison Ford...Ch. 8 - Segmented Income Statement Gorman Nurseries Inc....Ch. 8 - Prob. 19BEACh. 8 - Prob. 20BEACh. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Calculating Price by Applying a Markup Percentage...Ch. 8 - Calculating a Target Cost Yuhu manufactures cell...Ch. 8 - Structuring a Make-or-Buy Problem Coed Scents, a...Ch. 8 - Structuring a Special-Order Problem Rabbit Foot...Ch. 8 - Prob. 28BEBCh. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Prob. 32BEBCh. 8 - Prob. 33BEBCh. 8 - Prob. 34BEBCh. 8 - Brief Exercise 8-35 Calculating a Target Cost...Ch. 8 - Model for Making Tactical Decisions The model for...Ch. 8 - Prob. 37ECh. 8 - Use the following information for Exercises 8-38...Ch. 8 - Prob. 39ECh. 8 - Prob. 40ECh. 8 - Prob. 41ECh. 8 - Prob. 42ECh. 8 - Prob. 43ECh. 8 - Prob. 44ECh. 8 - Prob. 45ECh. 8 - Sell at Split-Off or Process Further Bozo Inc....Ch. 8 - Use the following information for Exercises 8-47...Ch. 8 - Prob. 48ECh. 8 - Calculating Price Using a Markup Percentage of...Ch. 8 - Target Costing H. Banks Company would like to...Ch. 8 - Keep or Buy, Sunk Costs Heather Alburty purchased...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Segmented Income Statement, Management Decision...Ch. 8 - Make or Buy, Qualitative Considerations Hetrick...Ch. 8 - Sell or Process Further Zanda Drug Corporation...Ch. 8 - Keep or Drop AudioMart is a retailer of radios,...Ch. 8 - Accept or Reject a Special Order Steve Murningham,...Ch. 8 - Cost-Based Pricing Decision Jeremy Costa, owner of...Ch. 8 - Product Mix Decision, Single Constraint Sealing...Ch. 8 - Special-Order Decision, Qualitative Aspects Randy...Ch. 8 - Sell or Process Further, Basic Analysis Shenista...Ch. 8 - Product Mix Decision, Single Constraint Norton...Ch. 8 - Sell at Split-Off or Process Further Eunice...Ch. 8 - Differential Costing As pointed out earlier in...Ch. 8 - Prob. 68CCh. 8 - Keep or Drop a Division Jan Shumard, president and...
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