Assignment 8 - Solutions to managerial accounting exercises PDF

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Solutions to managerial accounting exercises ...

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Assignment 8 E7-3 a) Revenues=7,5*15,000=114,000 Costs=Costs of goods sold+ Operating expenses = (2,600,000*0.7/350,000)*15,000+(840,000*0.75/350,000)*15,000=78,000+30,0 00=$114,000 Reject Order Accept Order Net income Revenues 0 $114,000 $114,000 Costs 0 108,000 (108,000) Net income 0 $6,000 $6,000 b) This analysis indicates that net income will increase by 6,000 therefore Leno Company should accept the special order. E7-5 a) Direct Materials Costs=4*30,000=$120,000 Direct Labor Costs=5*30,000=$150,000 Variable Costs=0.7*Direct Labor Cost=$105,000 Purchase Price=12.75*30,000=$382,500 Make Buy Net Income $120,000 $0 $120,000 Direct Materials Costs Direct Labor Costs 150,000 0 150,000 Variable Costs 105,000 0 105,000 Fixed Costs 45,000 45,000 45,000 Purchase Price 0 382,500 (382,500) Total Costs $420,000 427,500 $(7,500) b) This Analysis indicates that Schopp Inc. would incur 7,500 of additional costs by buying the shades rather than making them. Therefore, they should continue to make the shades. c) Make Buy Net income Total Cost $420,000 $427,500 $(7,500) Opportunity Cost 25,000 0 25,000 Total Cost $445,000 $427,500 $17,500

Yes the answer is different: The analysis shows that the net income will increase by 17,500 if Schopp Inc. purchases the shades rather than making them E7-1 a) Net income at the split off point = Sales Value at Split-off PointCommon Cost=60,000+15,000+55,000-100,000=$30,000 b) Net income after further processing = Sales Value after processing further -Common Cost-Costs to process further=190,000+35,000+215,000-100,000(100,000+30,000+150,000)=$60,000 c) Product 10 Sell Process further Net Income Sales $60,000 $190,000 $130,000 Costs to process 0 100,000 (100,000) further $60,000 $90,000 $30,000

Sales Costs to process further

Product 12 Sell Process further $15,000 $35,000 0 30,000 $15,000

Sales Costs to process further

$5,000

Product 14 Sell Process further $55,000 $215,000 0 150,000 $55,000

$65,000

Net Income $20,000 (30,000) ($10,000)

Net Income $160,000 (150,000) $10,000

 Products 10 and 14 should be processed further because they increase the net income each however product 12 should be sold at split off point because it decrease net income by $10,000 d) Net income after further processing = Sales -Common Cost-Costs to process further=15,000+190,000+215,000-100,000(100,000+150,000)=$70,000

Net income in d is higher than net income in b because product 12 is not processed further which will eventually increase net income by $10,000 E7-14 Retain Equipment Replace Equipment Net Income Variable Manufacturing Costs $125,000 $100,000 25,000 New Machine Cost 0 $25,000 (25,000) Sale of old machine 0 (6,000) 6,000 Total $125,000 $119,000 $6,000  Johnson Enterprise should buy a new computer because it will increase the net income by $6,000 E7-16 a) Net income=30,000+70,000-40,000=$60,000 b) Sales Variable Expense Contribution Margin Fixed Costs

Tingler $300,000 150,000

Shocker $500,000 200,000

150,000

300,000

142,500=30,000+(300,000/800,0 267,500=80,000+(500,000/800,000 00*300,000) *300,000) Net income $7,500 $32,500 b) New net income= 7,500+32,500=40,000  Cawley Company should not eliminate Stunner even though it is not profitable because it will increase the income by $20,000 E7-18 1) Irrelevant: The unavoidable overhead will be incurred none the less 2) Relevant 3) Irrelevant: sunk cost 4) Irrelevant: Sunk cost 5) Relevant 6) Relevant 7) Relevant 8) Relevant 9) Irrelevant: if there is no change of the direct materials so it’s irrelevant 10) Relevant...