Accounting Assignment
Crazy0536
week___7_graded_homework-students.xlsxEX 16-12
| 16-12 Accept special sales order? SureLock Manufacturing Co. makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $ 19.62 per lock. An analysis of this amount indicates that $ 11.90 of the total cost has a variable cost behavior pattern, and the remainder is an allocation of fixed manufacturing overhead. The normal selling price of this model is $ 29.00 per lock. A chain store has offered to buy 14,000 ZForce locks from SureLock at a price of $ 15.75 each to sell in a market that would not compete with SureLock’s regular business. SureLock has manufacturing capacity available and could make these locks without incurring additional fixed manufacturing overhead. | |
| Given | |
| Total Mfg Cost | $19.62 |
| Variable cost | $11.90 |
| Fixed Cost | $7.72 |
| Normal SP | |
| Special order-Qty | 14,000 |
| Special order SP | $15.75 |
| Required: | |
| a. Calculate the effect on SureLock’s operating income of accepting the order from the chain store. Capacity available | |
| Special Order Qty | |
| Special order SP | |
| Variable Cost | |
| CM | |
| Increase in Profit | |
| b. If SureLock’s costs had not been classified by cost behavior pattern, is it likely that a correct special order analysis would have been made? Explain your answer. | |
| Special Order Qty | |
| Special order SP | |
| Variable Cost | |
| CM | |
| Increase in Profit | |
| c. Identify the key qualitative factors that SureLock managers should consider with respect to this special order decision. | |
Ex 16-16
| 16-16 The make or buy decision Redbud Company uses a certain part in its manufacturing process that it buys from an outside supplier for $ 44 per part plus another $ 6 for shipping and other purchasing- related costs. The company will need 10,000 of these parts in the next year and is considering making the part internally. After performing a capacity analysis, Redbud determined that it has sufficient unused capacity to manufacture the 10,000 parts but would need to hire a manager at an annual salary of $ 40,000 to oversee this production activity. Estimated production costs are determined to be: | |||
| Direct material | $28 | ||
| Direct labor | $12 | ||
| Variable OH | $6 | ||
| Fixed OH (includes manager $4) | $10 | ||
| Total unit cost | $56 | ||
| Current Material | Bring Inhouse | ||
| Purchase Outside | $44 | Manager | $40,000 |
| Freight | $6 | ||
| $50 | |||
| Required: | |||
| a. Identify the relevant costs to make this part internally. | |||
| Direct material | |||
| Direct labor | |||
| Variable OH | |||
| Manager | |||
| b. Should Redbud produce the part or continue to buy it from the outside supplier? | |||
| Est Production | Avoidable | ||
| Cost | Cost | ||
| Material | |||
| Labor | |||
| Variable OH | |||
| FOH | |||
| Current Material | |||
| Purchase Outside | |||
| Freight | |||
| Total Purchase | |||
| c. What other factors are important to this decision? | |||
Pr 16-28
| 16-28 Relevant costs, special sales order— idle versus full capacity Petro Motors, Inc. ( PMI), produces small gasoline- powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. PMI recently completed the addition of new plant and equipment at a cost of $ 6,000,000, thereby increasing its manufacturing capacity to 100,000 motors annually. The addition to plant and equipment will be depreciated on a straight- line basis over 10 years. Sales of motors were 75,000 units prior to the completion of the additional capacity. Cost records indicated that manufacturing costs had totaled $ 76 per motor, of which $ 60 per motor was considered to be variable manufacturing costs. PMI has used the volume of activity at full capacity as the basis for applying fixed manufacturing overhead. The normal selling price is $ 100 per motor, and PMI pays a 10% commission on the sale of its motors. LawnPro. com offered to purchase 20,000 motors at a price of $ 75 per unit to test the viability of distributing lawn mower replacement motors through its website. PMI would be expected to produce the motors, store them in its warehouse, and ship individual motors to LawnPro. com customers. As orders are placed directly through the LawnPro. com website, they would be forwarded instantly to PMI. No commissions will be paid on this special sales order, and freight charges will be paid by the customer purchasing a motor. | |||
| Given: | Normal | ||
| New Plant & Equip | $6,000,000 | SP | $100 |
| Capacity | 100,000 | Commision | $10 |
| Life | 10 | ||
| Cost | Special Order | ||
| Mfg-Total | $76 | SP | $75 |
| Mfg-VC | $60 | Units | 20,000 |
| Mfg-Fix | $16 | Commission | $0 |
| Units for OH | 75,000 | ||
| Required: | |||
| a. Calculate the cost per motor, for cost accounting purposes, after completion of the additional plant capacity. | |||
| Original FC | |||
| Per unit | |||
| Units | |||
| Fixed Cost | |||
| Additional depr | |||
| Value' | |||
| Life | |||
| Add depr | |||
| New FOH | |||
| Units | |||
| Unit Cost-FC | |||
| Unit Cost-VC | |||
| Total Unit cost | |||
| b. Identify all the relevant costs that PMI should consider in evaluating the special sales order from LawnPro. com. | |||
| c. Should the offer from LawnPro. com be accepted? Why or why not? | |||
| SP | |||
| VC | |||
