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Unformatted text preview: 113 1. Research and development Labor costs for scientist working on new engine technology. 2. Design Utilities costs for the design center 3. Production Cost of materials used to make cars 4. Marketing Costs to purchase advertisements on television 5. Distribution Transportation costs to ship cars to dealers 6. Customer service Costs to deal with customer complaints 114 The Southern Audio should negotiate with CC to make them accept to keep the onemonth inventory. The Southern Audio can pay $0.1 per unit of inventory storage for CC if they do that they can save a half of cost instead of keeping by themselves. And the CC will not worry about the cost which they have to pay when they keep the inventory storage for the Southern Audio. 115 a. The differential cost of the labor cost the operation staff should consider for the decision to use the new method for next year. The cost saving per unit is 0.2 x (35%) = $0.07/ unit b. By assessing the differential cost from (a) and associate with alternative courses of action to make decision. 116 The differential revenues if this division discontinue: 0 – 2,580,000 = $(2,580,000) The differential costs if this division discontinue: AdvertisingCity Division 0 – 105,000 = $(105,000) Cost of goods sold 0 – 1,290,000 = $(1,290,000) Divisional administrative salaries 0 – 174,000 = $(174,000) Selling costs (sales commissions) 0 – 346,000 = $(346,000) Rent 0 – 443,000 = $(443,000) Share of corporate administration 0 – 285,000 = $(285,000) Total costs 0 – 2,643,000 =$(2,843,000) It will effect on TriState’s profit: Profit before income tax (2,580,000) – (2,843,000) = 63,000 Income Tax 63,000 x 40% = 25,200 Net profit 63,000 – 25,200 = 37,800 ...
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- Spring '10