Homework _ C13, 12, 7 - E 13-2 $/u Sales VC CM -FC NI 1...

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E 13-2 $/u # unit Total % Sales $30.00 1,000 $30,000.00 100% VC $20.00 1,000 $20,000.00 67% CM $10.00 1,000 $10,000.00 33% -FC $7,500.00 NI $2,500.00 Dirt Bikes Mtn Bike Racing Total Dirt Bikes Mtn Bike Racing Total Sales $90,000.00 $150,000.00 $60,000.00 $300,000.00 Sales $90,000.00 $150,000.00 $- $240,000.00 VC 27,000.00 60,000.00 33,000.00 120,000.00 VC 27,000.00 60,000.00 - 87,000.00 CM 63,000.00 90,000.00 27,000.00 180,000.00 CM 63,000.00 90,000.00 - 153,000.00 -TrFC: adver 10,000.00 14,000.00 6,000.00 30,000.00 -TrFC: adver 10,000.00 14,000.00 - 24,000.00 Dpn: special 6,000.00 9,000.00 8,000.00 23,000.00 Dpn: special 6,000.00 9,000.00 - 15,000.00 Salaries: prod 12,000.00 13,000.00 10,000.00 35,000.00 Salaries: prod 12,000.00 13,000.00 - 25,000.00 Segment Income 35,000.00 54,000.00 3,000.00 92,000.00 Segment Income 35,000.00 54,000.00 - 89,000.00 Common FC 60,000.00 Common FC 60,000.00 Net Income $32,000.00 Net Income $29,000.00 As shown above, the production of racing bikes brings $3,000 in income for the Regal Cycle Company. Therefore, we shouldn't discontinue the sale of the racing bikes. The format that we used above is more usuable to management in assessing the long-run profitability of the various product line E 13-3 {VOH: Variable Overhead; spvr: supervisor; dpn: depreciation; CFC: Common Fixed Cost 1) Make What costs are avoidable if I no longer make the product? Is Will be Direct Materials 14 35 As we buy the carburetors from outside supplier, the traceable FOH of depreciation and the CFC are unavoidable make the total price Direct Labor 10 of the carburetors from outside supplier up to $48, $6 more than the price of carburetors made from the company. VOH 3 Therefore, Troy Engines shouldn't accept the offer from the outside supplier TrFOH - spvr 2 TrFOH - dpn 4 4 CFC 9 9 Cost/unit 42 48 2) As the company could use freed capacity to launch a new product and would earn $150,000 per year for that, the benefit gaining from not produce carburetors is $10.00 per unit Is Will be Direct Materials 14 35 With the proper use of freed capacity, the price per unit of carburetors will be reduced to $38, $4 less than the price of carburetors made Direct Labor 10 from the company. VOH 3 Therefore, Troy Engines should accept the offer from the outside supplier TrFOH - spvr 2 TrFOH - dpn 4 4 CFC 9 9 Deduction 0 -10 Cost/unit 42 38 E 13-6 Product A Product B Product C Sell Now Process further Sell Now Process further Sell Now Process further Price $16.00 $20.00 $8.00 $13.00 $25.00 $32.00 Number 15,000.00 15,000.00 20,000.00 20,000.00 4,000.00 4,000.00 Lost $- $63,000.00 $- $80,000.00 $- $36,000.00 Total $240,000.00 $237,000.00 $160,000.00 $180,000.00 $100,000.00 $92,000.00 So, at the split-off point: Product A & Product C should be sold, and product B should be processed further.
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E 13-4 Current Special Unit Cost Order DM $84.00 $86.00 So accepting this special order will increase the company's net income by
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Homework _ C13, 12, 7 - E 13-2 $/u Sales VC CM -FC NI 1...

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