{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Financial Accounting_ch._6_sols_horngren_et._al._14e

# Financial Accounting_ch._6_sols_horngren_et._al._14e - The...

This preview shows pages 1–4. Sign up to view the full content.

The following solutions are from ancillary materials for Introduction to Management Accounting, 14 th . edition (Chapters 1-14), by Charles T. Horngren, Gary L. Sundem, and William O. Stratton, David Burgstahler, Jeff Schatzberg, Pearson Prentice Hall, U.S., 2008 CHAPTER 6 COVERAGE OF LEARNING OBJECTIVES LEARNING OBJECTIVE FUNDA- MENTAL ASSIGNMENT MATERIAL CRITICAL THINKING EXERCISES AND EXERCISES PROBLEMS CASES, EXCEL, COLLAB. & INTERNET EXERCISES LO1: Use a differential analysis to examine income effects across alternatives, and show that an opportunity cost analysis yields identical results. 24,27,28,29, 30,31, 42,44 45,46,47,48, 49,50,56,61 LO2: Decide whether to make or to buy certain parts or products. A1,B1 25,32,33,34 62,63 65,66,67,68, 70 LO3: Choose whether to add or delete a product line using relevant information. B3 36 LO4: Compute the optimal product mix when production is constrained by a scarce resource. A2,B2 35 51,53 LO5: Decide whether a joint product should be processed beyond the split-off point. A3,B4 37,38 54,55 69 LO6: Decide whether to keep or replace equipment. A4,B5 40 57,59 LO7: Identify irrelevant and misspecified costs. 26,39,41 52,58,64 71 LO8: Discuss how performance measures can affect decision making. B6 43 60 55

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
CHAPTER 6 Relevant Information and Decision Making With a Focus on Operational Decisions 6-A1 (20 min) 1. The key to this question is what will happen to the fixed overhead costs if production of the boxes is discontinued. Assume that all \$60,000 of fixed costs will continue. Then, Sunshine State will lose \$12,000 by purchasing the boxes from Weyerhaeuser: Payment to Weyerhaeuser, 80,000 x \$2.10 \$168,000 Costs saved, variable costs 156,000 Additional costs \$ 12,000 2. Some subjective factors are: Might Weyerhaeuser raise prices if Sunshine State closed down its box-making facility? Will sub-contracting the box production affect the quality of the boxes? Is a timely supply of boxes assured, even if the number needed changes? Does Sunshine State sacrifice proprietary information when disclosing the box specifications to Weyerhaeuser? 3. In this case the fixed costs are relevant. However, it is not the depreciation on the old equipment that is relevant. It is the cost of the new equipment. Annual cost savings by not producing the boxes now will be: Variable costs \$156,000 Investment avoided (annualized) 80,000 Total saved \$236,000 The payment to Weyerhaeuser is \$236,000 - \$168,000 = \$68,000 less than the savings, so Sunshine State would be \$68,000 better off subcontracting the production of the boxes. 56
6-A2 (10 min.) 1. Contribution margins: Plain = \$70 - \$50 = \$20 Professional = \$100 - \$70 = \$30 Contribution margin ratios: Plain = \$20 ÷ \$70 = 28.6% Professional = \$30 ÷ \$100 = 30% 2. Plain Professional a. Units per hour 2 1 b. Contribution margin per unit \$20 \$30 Contribution margin per hour \$40 \$30 Total contribution for 20,000 hours \$800,000 \$600,000 3. The plain circular saws are the best use of the scarce machine hours. For a given capacity, the criterion for maximizing profits is to obtain the greatest possible contribution to profit for each unit of the limiting or scarce factor. Moreover, fixed costs are irrelevant unless their total is affected by the choice of products.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}