ACCT 212 Connect Homework 10 Relevant Costing Assignment solutions complete answers

ACCT 212 Connect Homework 10 Relevant Costing Assignment solutions complete answers 

 

Edge Company produces two models of its product with the same machine. The machine has a capacity of 150 hours per month. The following information is available.

 

Cobe Company has manufactured 255 partially finished cabinets at a cost of $63,750. These can be sold as is for $76,500. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $15,300, and the finished cabinets could be sold for $102,000.

 

Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $317,500 of its fixed costs are avoidable.

 

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $48,000 and a remaining useful life of five years. It can be sold now for $58,000. Variable manufacturing costs are $43,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years.

 

Chip Company produces three products, Kin, Ike, and Bix. Each product uses the same direct material. Kin uses 4.2 pounds of the material, Ike uses 2.6 pounds of the material, and Bix uses 5.6 pounds of the material. Selling price per unit and variable costs per unit of each product follow.

 

Varto Company has 7,000 units of its product in inventory that it produced last year at a cost of $156,000. This year’s model is better than last year’s, and the 7,000 units cannot be sold at last year’s normal selling price of $51 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $98,000 or (2) they can be processed further at an additional cost of $140,500 and then sold for $231,000.

 

A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $41,600 or reworked for $73,600 and then sold for $137,600.

 

Beto Company pays $7.30 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $8.40 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost.

 

The company receives a special offer for 22,000 units at $12 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $88,000 and incremental fixed general and administrative costs of $95,000.

 

Farrow Company reports the following annual results.
 

Contribution Margin Income Statement
Per Unit
Annual Total
Sales (280,000 units)
$ 15.00
$ 4,200,000
Variable costs
 
 
Direct materials
2.00
560,000
Direct labor
4.00
1,120,000
Overhead
2.50
700,000
Contribution margin
6.50
1,820,000
Fixed costs
 
 
Fixed overhead
2.00
560,000
Fixed general and administrative
1.50
420,000
Income
$ 3.00
$ 840,000

The company receives a special offer for 28,000 units at $12 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $112,000 and incremental fixed general and administrative costs of $120,000.

(a) Compute the income or loss for the special offer.
(b) Should the company accept or reject the special offer?

 

Beto Company pays $4.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $4.20 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost.

(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.)
(b) Should Beto make or buy the part?

 

A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $33,800 or reworked for $62,400 and then sold for $111,800.

(a) Prepare a scrap or rework analysis of income effects.
(b) Should the company sell the units as scrap or rework them?

 

Varto Company has 11,800 units of its product in inventory that it produced last year at a cost of $154,000. This year’s model is better than last year’s, and the 11,800 units cannot be sold at last year’s normal selling price of $46 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $106,200 or (2) they can be processed further at an additional cost of $231,000 and then sold for $330,400.

(a) Prepare a sell as is or process further analysis of income effects.
(b) Should Varto sell the products as is or process further and then sell them?

 

Suresh Company reports the following segment (department) income results for the year.
 

 
Department M
Department N
Department O
Department P
Department T
Total
Sales
$ 88,000
$ 46,000
$ 84,000
$ 72,000
$ 45,000
$ 335,000
Expenses
 
 
 
 
 
 
Avoidable
19,300
47,800
18,800
23,500
54,900
164,300
Unavoidable
59,400
24,000
6,100
59,100
23,100
171,700
Total expenses
78,700
71,800
24,900
82,600
78,000
336,000
Income (loss)
$ 9,300
$ (25,800)
$ 59,100
$ (10,600)
$ (33,000)
$ (1,000)

 

rev: 12_03_2021_QC_CS-286816

a. If the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be eliminated?

 

b. Compute the total increase in income if the departments with sales less than avoidable costs, as identified in part a, are eliminated.

 

Chip Company produces three products, Kin, Ike, and Bix. Each product uses the same direct material. Kin uses 3.6 pounds of the material, Ike uses 2.2 pounds of the material, and Bix uses 6.9 pounds of the material. Selling price per unit and variable costs per unit of each product follow.

 

 
Kin
Ike
Bix
Selling price per unit
$ 154.88
$ 107.22
$ 224.73
Variable costs per unit
98.00
85.00
144.00

(a) Compute contribution margin per pound of material for each product. (b) If demand is limited, list the three products in the order in which management should produce and meet demand.

 

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of four years. It can be sold now for $57,000. Variable manufacturing costs are $46,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years.
 

 
Machine A
Machine B
Purchase price
$ 122,000
$ 136,000
Variable manufacturing costs per year
20,000
14,000

(a) Compute the income increase or decrease from replacing the old machine with Machine A.
(b) Compute the income increase or decrease from replacing the old machine with Machine B.
(c) Should Lopez keep or replace its old machine?
(d) If the machine should be replaced, which new machine should Lopez purchase?

 

Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $330,000 of its fixed costs are avoidable.
 

Segment Income (Loss)
 
Sales
$ 1,097,600
Variable costs
784,000
Contribution margin
313,600
Fixed costs
376,000
Income (loss)
$ (62,400)

(a) Compute the income increase or decrease from eliminating this segment.
(b) Should the segment be continued or eliminated?

 

Cobe Company has manufactured 245 partially finished cabinets at a cost of $61,250. These can be sold as is for $73,500. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $14,700, and the finished cabinets could be sold for $98,000.

(a) Prepare a sell as is or process further analysis of income effects.
(b) Should the cabinets be sold as is or processed further and then sold?

 

Edge Company produces two models of its product with the same machine. The machine has a capacity of 158 hours per month. The following information is available.
 

 
Standard
Deluxe
Selling price per unit
$ 160
 
$ 190
 
Variable costs per unit
65
 
114
 
Contribution margin per unit
$ 95
 
$ 76
 
Machine hours per unit
1
hour
2
hours
Maximum unit sales per month
550
units
200
units
 

1. Determine the contribution margin per machine hour for each model.

2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month?

3. Assume the maximum demand for the Standard model is 80 units (not 550 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month?

 

JART manufactures and sells underwater markers. Its contribution margin income statement follows.
 

Contribution Margin Income Statement
For Year Ended December 31
Per Unit
Annual Total
Sales (410,000 units)
$ 6.00
$ 2,460,000
Variable costs
 
 
Direct materials
1.45
594,500
Direct labor
0.35
143,500
Variable overhead
0.60
246,000
Contribution margin
3.60
1,476,000
Fixed costs
 
 
Fixed overhead
0.30
123,000
Fixed general and administrative
0.25
102,500
Income
$ 3.05
$ 1,250,500

A potential customer offers to buy 51,000 units for $3.00 each. These sales would not affect the company’s sales through its normal channels. Details about the special offer follow.

Direct materials cost per unit and variable overhead cost per unit would not change.
Direct labor cost per unit would be $0.53 because the offer would require overtime pay.
Accepting the offer would require incremental fixed general and administrative costs of $5,100.
Accepting the offer would require no incremental fixed overhead costs.

Required:
1. Compute income from the special offer.
2. Should the company accept or reject the special offer?