Accounting Practice Problems (4)-----Dr. Willian

Details:

Please complete the following exercises and/or problems from the textbook:

· E25-10

· E25-13

· E25-18

· E25-15

· CP25-34

Prepare your answers in an Excel workbook, using one worksheet per exercise or problem.

E25-10 Making special pricing decisions

Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached

Hobby-Cardz with a special order. The Hall of Fame wishes to purchase 57,000

baseball card packs for a special promotional campaign and offers $0.41 per pack, a

total of $23,370. Hobby-Cardz’s total production cost is $0.61 per pack, as follows:

Variable costs: Direct materials $ 0.13 Direct labor 0.06 Variable overhead 0.12 Fixed overhead 0.30 Total cost $ 0.61

Hobby-Cardz has enough excess capacity to handle the special order.

E25-13 Making dropping a product decisions

Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision:

MOVIE STREET Income Statement For the Year Ended December 31, 2014

Total Blu-Ray Disc DVD Disc Sales Revenue $432,000 $305,000 $127,000 Variable Costs 246,000 150,000 96,000 Constribution Margin 186,000 155,000 31,000 Fixed Costs: Manufacturing 128,000 71,000 57,000 Selling and Administrative 67,000 52,000 15,000 Total Fixed Expenses 195,000 123,000 72.000 Operating Income (Loss) $(9,000) $32,000 $(41,000)

Total fixed costs will not change if the company stops selling DVDs.

Requirements

1. Prepare a differential analysis to show whether Movie Street should drop the

DVD product line.

2. Will dropping DVDs add $41,000 to operating income? Explain.

E25-18 Making outsourcing decisions

Fiber Systems manufactures an optical switch that it uses in its final product. The

switch has the following manufacturing costs per unit:

Direct Material $ 9.00

Direct Labor 1.50

Variable Overhead 5.00

Fixed Overhead 9.00

Manufacturing Product Cost $ 24.50

Another company has offered to sell Fiber Systems the switch for $18.50 per unit.

If Fiber Systems buys the switch from the outside supplier, the manufacturing

facilities that will be idled cannot be used for any other purpose, yet none of the

fixed costs are avoidable.

Prepare an outsourcing analysis to determine whether Fiber Systems should

P25-34 Making sell or process further decisions

This problem continues the Davis Consulting, Inc. situation from Problem P24-37

of Chapter 24. Davis Consulting provides consulting services at an average price

of $175 per hour and incurs variable costs of $100 per hour. Assume average fixed

costs are $5,250 a month.

Davis has developed new software that will revolutionize billing for companies.

Davis has already invested $200,000 in the software. It can market the software as

is at $30,000 per client and expects to sell to eight clients. Davis can develop the

software further, adding integration to Microsoft products at an additional development

cost of $120,000. The additional development will allow Davis to sell the

software for $38,000 each, but to 20 clients.

Should Davis sell the software as is or develop it further?