Download as:
Rating : ⭐⭐⭐⭐⭐
Price: $10.99
Language:EN
Pages: 25

Riverside tools corp believes that the

Requirement 1. Should Reward Plus accept this special order? Show your calculations.

Begin by completing an analysis, and start by showing the computation of the company's operating income without the

Variable costs:

Complete the analysis below to determine if Reward Plus should accept the special order under this scenario.

https://xlitemprod.pearsoncmg.com/api/v1/print/highered

1/25

Plant Capacity

11,000 Windows

Fixed manufacturing costs

the one-time only special order under the

Fixed marketing costs
(3)

reduced capacity because accepting the order

operating

that existing customers should get the benefit of these lower costs. Should Reward Plus accept the special order under

these conditions? Show your calculations.

Reward Plus should (7)

-

=

-
=
(8) operating income.

8/3/2021 6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello

Variable costs that vary with number of units produced

$

Variable costs (for setups, materials handling, quality control, and so on)

2: More Info

3: Requirements

1.
2.

3. As in requirement 1, assume that monthly capacity is 12,000 windows. Reward Plus is concerned that if it accepts the

special order, its existing customers will immediately demand a price discount of $10 in the month in which the special

Total Manufacturing

Manufacturing
Costs of CMCB Cost per Unit

Direct materials

Requirement 3. Now suppose that if Sunshine purchases CMCBs from Marley , its best alternative use of the capacity

currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Essence Corporation. Sunshine estimates

4/25

Choices for Sunshine

Make CMCBs Buy CMCBs Buy CMCBs
and Do Not and Do Not and Make
Make CB3s Make CB3s CB3s

Excess of future costs over future

Current Costs
in 2017

Expected Costs in 2018

$ 160
195
39 35

are not made

810,000 400,000

Suppose the capacity currently used to make CMCBs will become idle if

Sunshine purchases CMCBs from Marley .

following incremental revenues and costs from CB3s:

Total expected incremental future revenues $2,400,000

8/3/2021

3.

$10.00 price will be given. Best Trim can invest its cash at 10 % per year. It costs Best Trim $210 to place each purchase

order.

Let's begin the calculation for the opportunity cost of interest forgone by first determining the formula, then calculate the

opportunity cost.

be recorded in the accounting system, due to (5) transaction

Requirement 3. Should Best Trim purchase 276,000 units at the start of the year or 23,000 units each month? Show your

calculations.

if investment in inventory were invested

Relevant costs

8/3/2021

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello

Requirement 4. What other factors should Best Trim consider when making its decision?

1. What is the opportunity cost of interest forgone from purchasing all 276,000 units at the start of the year instead of in

12 monthly purchases of 23,000 units per order?

2.

Would this opportunity cost be recorded in the accounting system? Why?

3.
4.
(1)

Difference in average investment

Units purchased per month

(2) Investment percentage (3)
96% (4)

would not

Discounted price per unit

(5)
(6)

not preferred

no actual

(7)
(8)
(9)

Alternative A would be preferred even more.

Alternative B

8/25

Read the requirements . 9

Before determining which products to produce, let's calculate the contribution margin per unit and the contribution margin

Model 9 Model 14
-

(2)

=

Contribution margin per unit

÷
=

B. Both Model 9 and Model 14 since both models provide positive contribution margins.

C. Model 14 , since this model results in the higher contribution margin per unit.

https://xlitemprod.pearsoncmg.com/api/v1/print/highered

9/25
5.

information:
10 (Click the icon to view the department information.)

Each cabinet sells for $80 and has direct material costs of $40 incurred at the start of the machining operation. Boston

annual finishing output by 1,200 units. The annual cost of these jigs and tools is $25,000 . Should Boston acquire these

Select the formula, then enter the amounts to calculate the change in throughput contribution.

Requirement 2. The production manager of the Machining Department has submitted a proposal to do faster setups that

would increase the annual capacity of the Machining Department by 13,500 units and would cost $28,000 per year. Should

(8)
(10)

Requirement 3. An outside contractor offers to do the finishing operation for 11,000 units at $21 per unit, triple the $7 per

unit that it costs Boston to do the finishing in-house. Should Boston accept the subcontractor's offer? Show your

Change in throughput

×
(13)
=

contribution

×
=
Boston
in throughput contribution
incremental costs by

.

is

11/25

Boston to do the machining in-house. Should Boston accept Heaton 's offer? Show your calculations.

are

save any of these costs by subcontracting machining 6,000 units to Heaton. Total costs will be greater by

.

Boston

defective items produced? Explain your answer briefly.

The cost of 2,200 defective units at the machining operation is

production to the Finishing Department. Therefore, there

The cost of 2,200 defective units in the Finishing Department is

.

(23)
of (25) contribution margin.

Fixed operating costs per unit produced ($2,000,000 ÷

increase the annual capacity of the Machining Department by 13,500 units and would cost $28,000 per year. Should

Boston implement the change? Show your calculations.

5. Boston produces 2,200 defective units at the machining operation. What is the cost to Boston of the defective items

produced? Explain your answer briefly.

12/25
1.

Boston is considering using some modern jigs and tools in the finishing operation that would increase annual

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello
6.
Printers operates a printing press with a monthly capacity of 3,000
customers: Scott

12 (Click to view the data.)

13 (Click the icon to view the special order information.)

Scott Corporation

Since the (2)

of Leanne is (3)

than the (4)

Corporation

Now calculate the operating income using the allocation you determined above.

whether it should accept one company's business at the cost of the other.

B.
E.

then Arlington does not need to be concerned about turning down the business of the other

14/25

that in January. Arlington can choose to accept as much of the Scott and Leanne business for February as its capacity

allows. Assume that total machine-hours and fixed costs for February will be the same as in January.

Arlington
(1) Revenue

Revenue per machine-hour

Contribution margin

Variable cost

Operating income
(2) contribution margin
(3)
contribution margin per machine-hour

less

operating income

variable cost per machine-hour

revenue
(4) contribution margin
(5)
contribution margin per machine-hour
operating income

variable cost per machine-hour

revenue
(6) Leanne (7)

Revenue per machine-hour
Scott Contribution margin Variable cost per machine-hour
Contribution margin per machine-hour
Fixed costs
15/25
7.

related to the old and new ovens follows:
15 (Click the icon to view the information related to the old and new ovens.)

Begin by selecting the relevant items and then entering the appropriate cost in each respective column. Be sure to total the relevant costs. (If an input field is not used in the table, leave the input field empty; do not enter a zero. Use a minus sign or parentheses for any costs.)

Keep old oven

New oven

Total
Based on the calculations above, Angelo's Bakery (26)

Requirement 5. At what purchase price would Angelo's Bakery be indifferent between purchasing the new oven and continuing to use the old oven?

Angelo's Bakery would be indifferent between purchasing the new oven and keeping the old oven at a purchase

price of

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello

Old Oven New Oven

Original cost

29,000
47,000

7,000

Not acquired yet

24,000

$

17,000

Not acquired yet

Annual operating cost

$

20,000
13,000
7 years 5 years
2 years 0 years
5 years 5 years

Terminal disposal value (in 5 years)

$

0
0

2. What information is irrelevant? Why is it irrelevant?

3. Should Angelo's Bakery purchase the new oven? Provide support for your answer.

(21)

(23)

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello
(18)
(19)

(20)

Don't differ Irrelevant Irrelevant
Relevant Relevant
Not applicable Not applicable

Don't differ

(22)

Accumulated depreciation

Original cost (purchase price)

Current disposal value (market value)

Operating cost for 5 years

Book value

Installation cost

Accumulated depreciation

Terminal disposal value

(26)

should not

Book value

If bonuses are paid on cost control, managers will look for cost savings options, without regard to capital

This might reflect badly on him for purchasing the oven 2 years ago, when the new oven is available just 2

years later.

outlays year-after-year.

The higher annual operating costs of the new oven suggest the original purchase was a good choice.

This reflects well on the manager, as it shows he is always willing to look for cost-savings.

8.

disposal value of $0 and is depreciated on a straight-line basis. The equipment has a current disposal price of $500,000 .

However, the emergence of a new molding technology has led TechAide to consider either upgrading or replacing the

Determine the total relevant costs over 3 years. (If an input field is not used in the table, leave the input field empty; do not

enter a zero. Use parentheses or a minus sign for numbers to be subtracted.)

Requirement 2. Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable.

Replace Upgrade

(5)

(7)

The maximum one-time equipment cost that TechAide will be willing to pay to replace the old equipment rather than

upgrade it is

First determine the equation you will use to calculate the quantity TechAide would use to base its decisions. Then select the

amounts that will be used in the equation. (Round to the nearest whole number when solving for y.)

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello

Requirement 4. Assume that all data are as given in the original exercise. Dan Doria is TechAide 's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain.

Begin by calculating the operating income under each alternative. (If an input field is not used in the table, leave the input field empty; do not enter a zero. Round all amounts to the nearest whole number.)

Upgrade

because it results in a higher net income over a (17)

17: Data Table

Should TechAide upgrade its production line or replace it? Show your calculations.

Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable. All other

6-1 MyAccountingLab Homework: Chapter 11-Amanda Scarcello

22/25
(1)

Cash operating costs
(2)

Cash operating costs

One-time capital costs

(3)

One-time capital costs

(4)

replace

Cash operating costs
(5)

(6)

Cash Operating Costs + X Cash Operating Costs + X
Total Relevant Costs Total Relevant Costs
(7)
(8)

$1,728,000 - $500,000 + X

$5,928,000

$3,168,000 - $500,000 + X
$1,728,000 + X
(9)

(Var. mfg cost per desk × y) - Disposal price

(10)

(Var. mfg cost per desk × y) - Disposal price - One-time equip. cost

(Var. mfg cost per desk × y) - Disposal price + One-time equip. cost

(11)

$165 y - $500,000

$165 y + $500,000

9.

collection of tools for professional use rather than consumer use. Management needs to make a good decision about

whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a

them from the supplier in Taiwan? Explain.

than the relevant costs to manufacture the garden tools in Maryland.

Riverside Tools Corp

(3)

manufacture the garden tools in Maryland because the relevant

(4)

Maryland is

Requirement 3. What are some of the qualitative factors that Riverside Tools Corp should consider when deciding whether

(8)

19: Data Table

$ 690,000
9

Average selling price of tools

$ 28,600

Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)

Incremental annual fixed manufacturing costs associated with the new product line 350,000
$

$0.60 per unit

Variable selling and distribution costsª

310,000

the supplier in Taiwan? Explain.

2. Riverside Tools Corp believes that the U.S. dollar may weaken in the coming months against the New Taiwanese

outsource the garden tools manufacturing to Taiwan?

(1)

(2) (3) (4)
25/25
should
should not

more

should

(5)

Employee reliability and morale in the Taiwanese facility

Fluctuations in the value of the NTD relative to the U.S. dollar

(6)

Delivery lead times

Employee reliability and morale in the Taiwanese facility

(7)

Book value of the existing equipment and estimated replacements

Delivery lead times

(8)

Book value of the existing equipment and estimated replacements

Quality

https://xlitemprod.pearsoncmg.com/api/v1/print/highered

Copyright © 2009-2023 UrgentHomework.com, All right reserved.