Chapter 12 Homework Solutions

Chapter 12 Homework Solutions - Exercise128

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Exercise 12-8   Contribution margin lost if the Bath Department is dropped: Lost from the Bath Department. ......................................... $700,000 Lost from the Kitchen Department (10% × $2,400,000). ....   240,000     Total lost contribution margin. ............................................... 940,000 Less avoidable fixed costs ($900,000 – $370,000). ..............   530,000     Decrease in overall operating income. .................................. $410,000
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Exercise 12-9   Relevant Costs Item Make Buy Direct materials (60,000 @ $4.00). .............. $240,000 Direct labour (60,000 @ $2.75). .................. 165,000 Variable manufacturing overhead  (60,000 @ $0.50). ..................................... 30,000 Fixed manufacturing overhead, traceable  (1/3 of $180,000). ...................................... 60,000 Cost of purchasing from outside supplier  (60,000 @ $10). ........................................                         $600,000 Total cost. .................................................... $495,000 $600,000 The two-thirds of the traceable fixed manufacturing overhead costs that  cannot be eliminated, and all of the common fixed manufacturing overhead  costs, are irrelevant. The company would save $105,000 per year by continuing to make the 
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Chapter 12 Homework Solutions - Exercise128

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