costacctg13_sm_ch11

B costsofpurchases20000units 60 totalrelevantcostsof

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Unformatted text preview: _____ $80,000 Replace Difference $48,000 $32,000 (2,500) 2,500 8,000 (8,000) $53,500 $26,500 AP Manufacturing should replace the o ld machine. The cost savings are far greater than the cost to purchase the new machine. 11­18 (15 min.) Multiple choice. 1. (b) Special order price per unit Variable manufacturing cost per unit Contribut ion margin per unit = $1.50 ´ 20,000 units = $30,000 increase $1,200,000 $48 9 $57 1,140,000 60,000 25,000 $ 85,000 $6.00 4.50 $1.50 Effect on operating inco me 2. (b) Costs of purchases, 20,000 units ´ $60 Total relevant costs of making: Variable manufacturing costs, $64 – $16 Fixed costs eliminated Costs saved by not making Mult iply by 20,000 units, so total costs saved are $57 ´ 20,000 Extra costs of purchasing outside Minimum overall savings for Reno Necessary relevant costs that would have to be saved in manufacturing Part No. 575 11­4 11­19 (30 min.) Special order, activity­based costing. 1. Award Plus’ operating inco me under the alternatives of accept ing/reject ing the specia l order are: Without One­ With One­ Time Only Time Only Special Order Special Order 7,500 Units 10,000 Units Revenues Variable costs: Direct materials Direct manufacturing labor Batch manufacturing costs Fixed costs: Fixed manufacturing costs Fixed market ing costs Total costs Operating inco me 1 Difference 2,500 Units $250,000 87,500 100,000 12,500 –– –– 200,000 $ 50,000 $1,125,000 262,500 300,000 75,000 275,000 175,000 1,087,500 $ 37,500 2 $1,375,000 350,000 2 400,000 3 87,500 275,000 175,000 1,287,500 $ 87,500 3 1 $262, 500 ´ 10,000 7, 500 $300, 000 ´ 10,000 7, 500 $75,000 + (25 ´ $500) Alternat ively, we could calculate the incremental revenue and the incremental costs of the addit ional 2,500 unit s as fo llows: Incremental revenue $100 ´ 2,500 Incremental direct manufacturing costs Incremental direct manufacturing costs Incremental batch manufacturing costs Total incremental costs Total incremental operating inco me fro m accepting the special order $262,500 ´ 2,500 7,500 $300,000 ´ 2,500 7,500 $500 ´ 25 $250,000 87,500 100,000 12,500 200,000 $ 50,000 Award Plus should acce...
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