Managerial 13e Ch 11 HW

Managerial 13e Ch 11 HW - Cost Accounting 13 edition...

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Cost Accounting 13 edition CHAPTER 11 18, 19, 22, 25, and 38 Not on My Accounting Lab 11-18 Multiple choice. 1. (b) Special order price per unit $6.00 Variable manufacturing cost per unit 4.50 Contribution margin per unit $1.50 Effect on operating income = $1.50 × 20,000 units = $30,000 increase 2. (b) Costs of purchases, 20,000 units × $60 $1,200,000 Total relevant costs of making: Variable manufacturing costs, $64 – $16 $48 Fixed costs eliminated 9 Costs saved by not making $57 Multiply by 20,000 units, so total costs saved are $57 × 20,000 1,140,000 Extra costs of purchasing outside 60,000 Minimum overall savings for Reno 25,000 Necessary relevant costs that would have to be saved in manufacturing Part No. 575 $ 85,000
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11-19 Special order, activity-based costing. 1. Award Plus’ operating income under the alternatives of accepting/rejecting the special or- der are: Without One- Time Only Spe- cial Order 7,500 Units With One-Time Only Special Order 10,000 Units Difference 2,500 Units Revenues $1,125,000 $1,375,000 $250,000 Variable costs: Direct materials 262,500 350,000 1 87,500 Direct manufacturing labor 300,000 400,000 2 100,000 Batch manufacturing costs 75,000 87,500 3 12,500 Fixed costs: Fixed manufacturing costs 275,000 275,000 –– Fixed marketing costs 175,000 175,000 –– Total costs 1,087,500 1,287,500 200,000 Operating income $ 37,500 $ 87,500 $ 50,000 1 × 10,000 2 × 10,000 3 $75,000 + (25 × $500) Alternatively, we could calculate the incremental revenue and the incremental costs of the addi- tional 2,500 units as follows: Incremental revenue $100 × 2,500 $250,000 Incremental direct manufacturing costs × 2,500 87,500 Incremental direct manufacturing costs × 2,500 100,000 Incremental batch manufacturing costs $500 × 25 12,500 Total incremental costs 200,000 Total incremental operating income from accepting the special order $ 50,000
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Award Plus should accept the one-time-only special order if it has no long-term implications be- cause accepting the order increases Award Plus’ operating income by $50,000. If, however, accepting the special order would cause the regular customers to be dissatis- fied or to demand lower prices, then Award Plus will have to trade off the $50,000 gain from ac- cepting the special order against the operating income it might lose from regular customers.
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2. Award Plus has a capacity of 9,000 medals. Therefore, if it accepts the special one-time order of 2,500 medals, it can sell only 6,500 medals instead of the 7,500 medals that it currently sells to existing customers. That is, by accepting the special order, Award Plus must forgo sales of 1,000 medals to its regular customers. Alternatively, Award Plus can reject the special order and continue to sell 7,500 medals to its regular customers. Award Plus’ operating income from selling 6,500 medals to regular customers and 2,500
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Managerial 13e Ch 11 HW - Cost Accounting 13 edition...

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