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Relevant Info &amp; Decision

# Relevant Info &amp; Decision - Grand Valley State...

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Unformatted text preview: Grand Valley State University Relevant Information & Seidman College of Business Decision Making Problems School of Accounting Northern Stores is a retailer in the upper midwest. The most recent monthly income statement for Northern Stores is given below: Total Store 1 Store 11 Sales \$2,100,000 \$1,300,000 55 800,000 Less variable expenses 1 260 000 882,000 378,000 Contribution margin 33 840,000 \$ 418,000 \$ 422,000 Less traceable ﬁxed expenses 420,000 231,000 189,000 Segment margin \$ 420,000 \$ 187,000 \$ 233,000 Less common ﬁxed expenses 350,000 210,000 140,000 Net income \$ 70,000 is 123,000; \$ 93,000 Northern is considering closing Store I. If Store I is closed, one - fourth of its traceable ﬁxed expenses would continue to be incurred. Also, the closing of Store I would result in a 20% increase in sales at Store 11. Northern allocates common ﬁxed expenses on the basis of sales dollars and none of these costs would be saved if a store were closed. Compute the overall increase or decrease in the net income of Northern Stores if Store I is closed. The Immanuel Company has just obtained a request for a special order of 6,000 jigs to be shipped at the end of the month at a selling price of \$7 each. The company has a production capacity of 90,000 jigs per month with total ﬁxed production costs of \$144,000. At present, the company is selling 80,000 jigs per month through regular channels at a selling price of \$11 each. For these regular sales, the costs of one jig is: Variable production cost \$4.60 Fixed production cost 1.80 Variable selling expense 1.00 If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of \$0.30 per unit. If Immanuel accepts this special order, the change in the monthly net operating income will be a: \$12,600 increase \$14,400 increase \$ 3,600 increase 33 1,800 increase 9-.“ 9‘!” At what selling price per unit should Immanuel be indifferent between accepting or rejecting the special order? a. \$7.40 b. \$7.70 0. \$6.40 (1. \$4.90 Kramer Company makes 4,000 units per year of a part called an axial tap for use in one of its products. Data concerning the unit production costs of the axial tap follow: Direct materials \$3 5.00 Direct labor 10.00 Variable manufacturing overhead 8.00 Fixed manufacturing overhead 20.00 Total manufacturing cost per unit: \$73.00 An outside supplier has offered to sell Kramer Company all of the axial taps it requires. If Kramer Company decided to discontinue making the axial taps, 40% of the above ﬁxed manufacturing overhead costs could be avoided. Assume that direct labor is a variable cost. Assume Kramer Company has no alternative use for the facilities presently devoted to production of the axial taps. If the outside supplier offers to sell the axial taps for \$65.00 each, should Kramer Company accept the offer? Fully support your answer with appropriate calculations. When Mr. Ding L. Berry, president and chief executive of Berry, Inc., ﬁrst saw the segmented income statement below, he ﬂew into his usual rage. “When will we ever start showing a real proﬁt? I’m starting immediate steps to eliminate those two unproﬁtable lines!” Product Lines Total U V W Sales \$250,000 \$100,000 \$75,000 \$75,000 Variable expenses 119 000 37 000 35 000 47,000 Contribution margin \$13 1,000 \$ 63,000 \$40,000 \$28,000 Traceable ﬁxed expenses* 98,000 31,000 37,000 30,000 Common expenses, allocated 32,900 18,000 10,500 4,400 Operating income (loss) \$ 100 \$ 14,000 \$7,500! \$16,400; *These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Recommend which segments, if any, should be eliminated. Back up your recommendation with facts and ﬁgures. ' ...
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Relevant Info &amp; Decision - Grand Valley State...

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