ACCT 415

acct_week_5.xlsx

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Exercise E7-5

Name:
Course:
Date:
E7-5 – Use incremental analysis for make-or-buy decision
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse
Exercise E7-5 Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently
operating at	100%	of capacity, and variable manufacturing overhead is charged to production at
the rate of	70%	of direct labor cost. The direct materials and direct labor cost per unit to make the lamp
shades are	$4.00	and	$5.00	respectively. Normal production is	30,000
table lamps per year.
A supplier offers to make the lamp shades at a price of	$12.75	per unit. If Schopp Inc. accepts the
supplier's offer, all variable manufacturing costs will be eliminated, but the	$45,000	of fixed manufacturing
overhead currently being charged to the lamp shades will have to be absorbed by other products.
Instructions:
(a) Prepare the incremental analysis for the decision to make or buy the lamp shades.
Net Income Increase (Decrease)
Make	Buy
Direct materials	Amount	Amount	Formula
Title	Amount	Amount	Formula
Title	Formula	Formula	Formula
Title	Amount	Amount	Formula
Title	Amount	Amount	Formula
Total annual cost	Formula	Formula	Formula
(b) Should Schopp Inc. buy the lamp shades?
Enter text answer here.
(c) Would your answer be different in (b) if the productive capacity released by not making the lamp shades could
be used to produce income of	$25,000	?
Enter text answer here.
Net Income Increase (Decrease)
Make	Buy
Total annual cost (above)	Amount	Amount	Formula
Opportunity cost	Amount	Amount	Formula
Total cost	Formula	Formula	Formula

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Problem P7-5A

Name:
Course:
Date:
P7-5A – Prepare incremental analysis concerning elimination of divisions.
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse
Problem P7-5A Gutierrez Company has four operating divisions. During the first quarter of 2014, the company reported
aggregate income from operations of	$213,000	and the following divisional results.
Division
I	II	III	IV
Sales	$250,000	$200,000	$500,000	$450,000
Cost of goods sold	Direct labor costs	200,000	192,000	300,000	250,000
Selling and administrative expenses	Machine hours	75,000	60,000	60,000	50,000
Income (loss) from operations	Setup hours	($25,000)	($52,000)	$140,000	$150,000
Analysis reveals the following percentages of variable costs in each division.
I	II	III	IV
Cost of goods sold	75%	90%	80%	75%
Selling and administrative expenses	Machine hours	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 divisions (I and II). Consensus is that one or both of the divisions should be continued.
Instructions:
(a) Compute the contribution margin for Divisions I and II.
Division I	Division II
Sales	Amount	Amount
Variable costs
Cost of goods sold	Formula	Amount
Selling and administrative	Formula	Amount
Total variable expenses	Formula	Formula
Contribution margin	Formula	Formula
(b)(1) Prepare an incremental analysis concerning the possible discontinuance of Division I.
Division I	Continue	Eliminate	Net Income Increase (Decrease)
Contribution margin (above)	Formula	Formula	Formula
Fixed costs
Cost of goods sold	Formula	Formula	Formula
Selling and administrative	Formula	Formula	Formula
Total fixed expenses	Formula	Formula	Formula
Income (loss) from operations	Formula	Formula	Formula
(b)(2) Prepare an incremental analysis concerning the possible discontinuance of Division II.
Division II	Continue	Eliminate	Net Income Increase (Decrease)
Contribution margin (above)	Amount	Amount	Formula
Fixed costs
Title	Formula	Formula	Formula
Title	Formula	Formula	Formula
Title	Formula	Formula	Formula
Title	Formula	Formula	Formula
(b)(3) What course of action do you recommend for each division?
Enter text answer here.
Enter text answer here.
(c) Prepare a columnar condensed income statement for Moreno Manufacturing, assuming Division II is eliminated. Use the CVP format. Division II's unavoidable fixed costs are allocated equally to the continuing divisions.
GUTIERREZ MANUFACTURING COMPANY
CVP Income Statement
For the Quarter Ended March 31, 2014
Divisions
I	III	IV	Total
Sales	Amount	Amount	Amount	Formula
Variable costs
Title	Formula	Formula	Formula	Formula
Title	Formula	Formula	Formula	Formula
Title	Formula	Formula	Formula	Formula
Contribution margin	Formula	Formula	Formula	Formula
Fixed costs
Title	Formula	Formula	Formula	Formula
Title	Formula	Formula	Formula	Formula
Title	Formula	Formula	Formula	Formula
Income (loss) from operations	Formula	Formula	Formula	Formula
Enter text answer here.
Enter text answer here.
(d) Reconcile the total income from operations,	$213,000	with the total income from operations without Division II.
Enter text answer here.

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Problem P8-1A

Name:
Course:
Date:
P8-1A – Use cost-plus pricing to determine various amounts
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse
Problem P8-1A Dewitt Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to this new product.
Per unit	Total
Direct materials	$20.00
Direct labor	40.00
Variable manufacturing overhead	10.00
Fixed manufacturing overhead	$1,440,000
Variable selling and administrative expenses	5.00
Fixed selling and administrative expenses	960,000
These costs are based on a budgeted volume of	80,000	units produced and sold each year.Dewitt uses
cost-plus pricing methods to set its target selling price. The markup on total unit cost is	30%
Instructions:
(a)(1) Compute the total variable cost per unit for M14-M16.
Title	Amount
Title	Amount
Title	Amount
Title	Amount
Title	Formula
(a)(2) Compute the total fixed cost per unit for M14-M16.
Total Costs	÷	Budgeted Volume	=	Cost per Unit
Title	Amount	÷	Quantity	=	Formula
Title	Amount	÷	Quantity	=	Formula
Title	Amount	÷	Quantity	=	Formula
(a)(3) Compute the total cost per unit for M14-M16.
Title	Amount
Title	Amount
Title	Formula
(b) Compute the desired ROI per unit for M14-M16.
Title	Amount
Title	Percentage
Title	Formula
(c) Compute the target selling price for M14-M16.
Title	Amount
Title	Amount
Title	Formula
(d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that	60,000	M14-M16s are sold
during the year. (Round to two decimal places.)
Title	Amount
Title	Formula
Title	Formula