Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Chapter 8, Problem 8.16AE
Determine relevant and irrelevant information (Learning Objective 1)
O’Connor Frozen Foods purchased new computer-controlled production machinery last year from Advanced Enterprise. The equipment was purchased for $4.1 million and was paid for with cash. A representative from Advanced Enterprise recently contacted O’Connor management because Advanced Enterprise has an even more efficient piece of machinery available. The new design would double the production output of the equipment purchased last year but would cost O’Connor another $5.0 million. The old machinery was installed by an engineering firm; the same firm would be required to install the new machinery. Fixed selling costs would not change if the new machinery were to be purchased, but the variable selling cost per unit would decrease. Raw material costs (i.e., food ingredients) would remain the same with either machine. The new machinery would be purchased by signing a note payable at the bank, and interest would be paid monthly on the note payable. Maintenance costs on the new machine would be the same as the maintenance costs on the machinery purchased last year. Advanced Enterprise is offering a trade-in on the machinery purchased last year against the purchase price of the new machinery.
For each of the following costs, indicate whether or not each of the costs described would be relevant to O’Connor Frozen Foods’ decision about whether to purchase the new machinery or not.
| Item | Relevant | Not Relevant |
| a. Book value of old machine | ||
| b. Added profits from the increase in production resulting from the new machine | ||
| c. Interest expense on new machine | ||
| d. Trade-in value of old machine | ||
| e. Maintenance cost of new machine | ||
| f. Variable selling costs | ||
| g. Installation cost of old machine | ||
| h. Fixed selling costs | ||
| i. Sales tax paid on old machine | ||
| j. Cost of the new machine | ||
| k. Installation cost of new machine | ||
| l. Cost of the old machine | ||
| m. Accumulated depreciation on old machine | ||
| n. Maintenance costs of old machine | ||
| o. Cost per pound of food to be processed by the machinery |
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E-LEARNING COST ACCOUNTING ASSIGNMENT
Answer all the THREE Questions.
1 Mr Gardens, the financial controller of Sugarland Ltd, accidentally tossed the company's cost
records into a wastebasket which had been light .On realising that mistake, he rushed to the
roaring blaze and managed to retrieve only a few of the records. From the salvaged records, he
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(i) Sales totaled sh 1,000,000 during 2020.
(ii) The beginning inventories for the year were: work in progress sh 120,000;
Finished goods sh 60,000.
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(iv) Administrative expenses for 2014 were twice as great as net income…
Dexter Inc. is considering replacing its existing computer system with a new computer system. The new system can offer considerable savings in computer processing and inventory management costs. Information about the existing system and the new system follow:
Existing Computer
New Computer
Original cost
$20,000
$15,000
Annual operating cost
$ 3,500
$ 2,000
Current salvage value of the existing system
$ 4,000
---
Remaining life in 5 years
5 years
5 years
Salvage value in 5 years
$ 0
$ 0
Should Dexter replace the existing computer system with the new system? What are the cash flow savings or additional cost over the 5 years? Ignore income taxes.
Group of answer choices
Yes replace, net savings of $5,000.
No do not replace, additional costs of $3,500.
Yes replace, net savings of $15,000.
No do not replace, additional costs of $5,000.
Chapter 8 Solutions
Managerial Accounting (5th Edition)
Ch. 8 - Prob. 1QCCh. 8 - (Learning Objective 1) Keys to making short-term...Ch. 8 - (Learning Objective 2) Which is true of...Ch. 8 - (Learning Objective 3) Which of the following...Ch. 8 - Prob. 5QCCh. 8 - Prob. 6QCCh. 8 - (Learning Objective 4) A segment margin is the a....Ch. 8 - (Learning Objective 5) When resources are...Ch. 8 - (Learning Objective 6) Which of the following is...Ch. 8 - Prob. 10QC
Ch. 8 - Determine relevance of information (Learning...Ch. 8 - Prob. 8.2SECh. 8 - Prob. 8.3SECh. 8 - Prob. 8.4SECh. 8 - Prob. 8.5SECh. 8 - Prob. 8.6SECh. 8 - Prob. 8.7SECh. 8 - Prob. 8.8SECh. 8 - Product mix decision: Unlimited demand (Learning...Ch. 8 - Prob. 8.10SECh. 8 - Outsourcing production decision (Learning...Ch. 8 - Relevant information for outsourcing delivery...Ch. 8 - Prob. 8.13SECh. 8 - Prob. 8.14SECh. 8 - Prob. 8.15SECh. 8 - Determine relevant and irrelevant information...Ch. 8 - SUSTAINABILITY ES-17A Sustainability and...Ch. 8 - Prob. 8.18AECh. 8 - Prob. 8.19AECh. 8 - Analyze special order decision (Learning Objective...Ch. 8 - Prob. 8.21AECh. 8 - Prob. 8.22AECh. 8 - Prob. 8.23AECh. 8 - Discontinuing a product line (Learning Objective...Ch. 8 - Prob. 8.25AECh. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.27AECh. 8 - Make-or-buy product component (Learning Objective...Ch. 8 - Prob. 8.29AECh. 8 - Prob. 8.30AECh. 8 - Prob. 8.31AECh. 8 - Prob. 8.32BECh. 8 - Prob. 8.33BECh. 8 - Prob. 8.34BECh. 8 - Prob. 8.35BECh. 8 - Prob. 8.36BECh. 8 - Prob. 8.37BECh. 8 - Prob. 8.38BECh. 8 - Prob. 8.39BECh. 8 - Prob. 8.40BECh. 8 - Identify constraint, then determine product mix...Ch. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.43BECh. 8 - Prob. 8.44BECh. 8 - Prob. 8.45BECh. 8 - Determine maximum outsourcing price (Learning...Ch. 8 - Prob. 8.47BECh. 8 - Prob. 8.48APCh. 8 - Special order decision and considerations...Ch. 8 - Prepare and use contribution margin statements for...Ch. 8 - Product mix decision under constraint (Learning...Ch. 8 - Outsourcing decision given alternative use of...Ch. 8 - Prob. 8.53APCh. 8 - Prob. 8.54BPCh. 8 - Prob. 8.55BPCh. 8 - Prepare and use contribution margin statements for...Ch. 8 - Prob. 8.57BPCh. 8 - Prob. 8.58BPCh. 8 - Prob. 8.59BPCh. 8 - Decide whether to discontinue a department...Ch. 8 - Prob. 8.61ACTCh. 8 - Outsourcing Decision at a Real Company Go to the...Ch. 8 - Prob. 8.63ACTCh. 8 - Prob. 8.64ACT
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