Ch13 exercise solutions

Ch13 exercise solutions - Chapter 13 Relevant Cost Short...

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Chapter 13: Exercise 1: Identify the irrelevant costs associated with Sandy’s decision to stay in the apartment or move to the house? Rent of \$750 per month for two months. Identify two qualitative factors? Noise and the fenced yard Exercise 2: What is not relevant to Sherrell’s decision of expanding into the new space? Original bagel machine at a cost of \$3,500 If Sherrell decides to expand, how long will it be before she has a positive impact on operating income? Sales \$5,000 Less: Variable Costs (50% of sales) 2,500 Contribution Margin 2,500 Less: Fixed Costs 500 Operating Income \$2,000 per month Additional Costs of \$5,600 (Chair) and \$7,400 (new machine) = \$13,000 / \$2,000 OI = 6.5 BE - 7 months Exercise 3: If the special offer is accepted and produced with unused capacity, what will be the impact on income? + Selling Price \$18.00 - Variable Cost (14.00) - Shipping Cost ( 2.00) = CM per Unit \$2.00 x # of units 3,000 = Increase in Operating

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Ch13 exercise solutions - Chapter 13 Relevant Cost Short...

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