POA11e27 - CHAPTER 27Solutions SHORT-RUN DECISION ANALYSIS...

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Ch27 SE1 to SE2 SHORT-RUN DECISION ANALYSIS Chapter 27, SE 1. 1. Quantitative, nonfinancial 2. Quantitative, nonfinancial 3. Qualitative 4. Quantitative, financial 5. Qualitative Chapter 27, SE 2. Pices Corporation Incremental Analysis Difference in Favor of Posen Value Value Machine Machine Machine Increase in revenue $44,200 $49,300 $5,100 Increase in annual operating costs Direct labor $10,200 $10,600 ($ 400) Variable overhead 24,500 26,900 ( 2,400) Total increase in operating costs $34,700 $37,500 ($2,800) Resulting change in operating income $ 9,500 $11,800 $2,300 CHAPTER 27 Solutions
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Ch27 SE3 to SE4 Chapter 27, SE 3. Marc Company Outsourcing Decision Incremental Analysis Difference Make Buy in Favor of Part X Part X Making Part Costs to make the part Direct materials ( 7,500 × $3.50 ) $26,250 ($26,250) Direct labor ( 7,500 × $2.00 ) 15,000 ( 15,000) Variable overhead ( 7,500 × $4.00 ) 30,000 ( 30,000) Costs to buy the part 5,000 × $10 $50,000 50,000 2,500 × $9 22,500 22,500 Totals $71,250 $72,500 $ 1,250 The company should begin to make the part. Variable selling costs are irrelevant to this decision because they would be the same under either alternative. Chapter 27, SE 4. Dental Associates, Inc. Outsourcing Decision Incremental Analysis Difference in Favor of Continue to Continuing Perform Outsource to Perform Dental Dental Dental Costs per Cleaning Cleanings Cleanings Cleanings Employee labor $30 ($30) Dental supplies 10 ( 10) Variable overhead 8 ( 8) Independent hygienist $50 50 Totals $48 $50 $ 2 Dental Associates should continue to perform dental cleanings itself.
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Ch27 SE5 to SE6 Chapter 27, SE 5. Variable costs to produce Product R3P: Direct materials $ 7.60 Direct labor 3.75 Variable overhead 9.25 Total variable costs to produce $20.60 Hadley Company should not accept the special order because variable manu- facturing costs exceed the offered price. Chapter 27, SE 6. Cost per return Materials ( 10 pages × $1 ) $ 10 Labor ( 4hours × $60 ) 240 Variable overhead ( 10 pages × $0.50 ) 5 Desired profit per return 40 Minimum bid per return $ 295 Multiply by 4 returns 4 Minimum special order bid $1,180 Note: The fixed overhead cost per page is not relevant to this decision. x
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Ch27 SE7 Chapter 27 SE 7. Peruna Company Segment Profitability Decision Incremental Analysis North South Total Division Division Company Sales $530,000 $610,000 $1,140,000 Less variable costs 290,000 340,000 630,000 Contribution margin $240,000 $270,000 $ 510,000 Less direct fixed costs 130,000 174,000 304,000 Divisional income $110,000 $ 96,000 $ 206,000 Less common fixed costs 246,000 Operating income (loss) ($ 40,000) No, both divisions seem to be profitable and should not be considered for elimina- tion. The home office and its very heavy common fixed costs are causing the company's loss.
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Ch27 SE8 to SE9 Chapter 27, SE 8. Snow, Inc.
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POA11e27 - CHAPTER 27Solutions SHORT-RUN DECISION ANALYSIS...

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