Acct 301 Homework – Chapter 9

Chapter 9 E9-6, E9-11, P9-1A, P9-5A E9-6 SY Telc has recently started the bring into being of RecRobo, a three-wheel robot that can scan a home for fires and gas leaks and thus transmit this information to a mobile phone. The greet structure to manufacture 20,000 RecRobos is as follows. apostrophize Direct materials ($40 per robot) $800,000 Direct job ($30 per robot) 600,000 Variable operating expense ($6 per robot) 120,000 Allocated fixed overhead ($25 per robot) 500,000 Total $2,020,000 SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000. instructions (a) Using incremental analysis, determine whether SY Telc should accept this offer chthonian each of the following independent assumptions. * (1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided). * (2) Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Chen Inc. , SY Telc can wont the released produc tive resources to generate additional income of $300,000. * (b) Describe the qualitative factors that might rival the decision to purchase the robots from an outside supplier. E9-11 Twyla Enterprises uses a computer to handle its gross revenue invoices.Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is covering update its computer with a faster model that would eliminate all of the overtime processing. Current Machine New Machine Original purchase cost $15,000 $25,000 Accumulated depreciation $6,000 Estimated annual operating cost $24,000 $18,000 Useful lifetime 5 years 5 years If sold now, the menses form would have a salvage value of $5,000. If operated for the remainder of its useful life, the current machine would have zero salvage value.The new machine is judge to have zero salvage value after five years. Instructions Should the current machine be replaced? P9-1A Pro Sports Inc. manufactures basketballs for the National Basketball crosstie (NBA). For the origin 6 months of 2008, the comp whatever reported the following operating results duration operating at 90% of plant capacity and producing 112,500 units. Amount gross revenue $4,500,000 Cost of goods sold 3,600,000 change and administrative expenses 450,000 Net income $450,000 Fixed be for the period were cost of goods sold $1,080,000, and selling and administrative expenses $225,000.In July, normally a slack manufacturing month, Pro Sports receives a special prepare for 10,000 basketballs at $28 each from the Italian Basketball Association (IBA). Acceptance of the line of battle would increment covariant selling and administrative expenses $0. 50 per unit because of shipping be but would not increase fixed costs and expenses. Instructions * (a) coordinate an incremental analysis for the special order. * (b) Should Pro Sports Inc. accept the special order? Explain yo ur answer. * (c) What is the minimum selling price on the special order to produce net income of $4. 10 per ball? (d) What nonfinancial factors should anxiety consider in making its decision? P9-5A Lewis Manufacturing Company has four operating segments. During the first quarter of 2008, the company reported aggregate income from trading operations of $176,000 and the following divisional results. Division I II III IV Sales $250,000 $200,000 $500,000 $400,000 Cost of goods sold 200,000 189,000 300,000 250,000 Selling and administrative expenses 65,000 60,000 60,000 50,000 Income (loss) from operations $(15,000) $(49,000) $140,000 $100,000 Analysis reveals the following percentages of variable costs in each division. I II III IV Cost of goods sold 70% 90% 80% 75% Selling and administrative expenses 40 70 50 60 Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable di visions (I and II). Consensus is that one or both of the divisions should be discontinued. Instructions * (a) Compute the contribution margin for Divisions I and II. (a) I $84,000 (b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division? * (c) Prepare a columnar condensed income statement for Lewis Manufacturing, assuming Division II is eliminated. Use the CVP format. Division IIs unavoidable fixed costs are allocated equally to the continuing divisions. (c) Income III $133,850 * (d) Reconcile the total income from operations ($176,000) with the total income from operations without Division II.