BRIEF EXERCISE 6

BRIEF EXERCISE 6 - BRIEF EXERCISE 6-1 The correct order is:...

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BRIEF EXERCISE 6-1 The correct order is: 1. Identify the problem and assign responsibility. 2. Determine and evaluate possible courses of action. 3. Make a decision. 4. Review results of the decision. BRIEF EXERCISE 6-2 Alternative A Alternative B Net Income Increase (Decrease) Revenues Costs Net income $150,000 100,000 $ 50,000 $185,000 125,000 $ 60,000 ( $35,000 ) 25,000 $10,000 Alternative B is better than Alternative A. BRIEF EXERCISE 6-3 Reject Order Accept Order Net Income Increase (Decrease) Revenues Costs—Variable manufacturing Shipping Net income $0 0 0 $0 $72,000 60,000 6,000 $ 6,000 * ** *** ( $72,000 ) ( (60,000) ( (6,000 ) ( $ 6,000 ) The special order should be accepted. *3,000 X $24 **3,000 X $20 ***3,000 X $ 2
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BRIEF EXERCISE 6-4 Make Buy Net Income Increase (Decrease) Variable manufacturing costs Fixed manufacturing costs Purchase price Total annual cost $45,000 30,000 - 0 - $75,000 $ - 0 - 30,000 50,000 $80,000 $45,000 0 (50,000 ) ( $ (5,000) The decision should be to make the part. BRIEF EXERCISE 6-5
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This note was uploaded on 05/16/2011 for the course AC 303 taught by Professor Richardkido during the Spring '11 term at Chaminade University.

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BRIEF EXERCISE 6 - BRIEF EXERCISE 6-1 The correct order is:...

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