12-28 Selection of most profitable products. Isochlorine is produced in a chemical process that is very threatening to the environment. As a result of this, the government has limited the yearly production. Company Soleil uses isochlorine to produce four cosmetic products A, B, C, and D. Soleil has an inventory of 2,000 kg of isochlorine at a value of $20,000. As a result of production restrictions imposed on their supplier, Soleil will not be able to purchase ad- ditional isochlorine during the coming period. Although Soleil, by means of its commercial campaign, suggests that its main goal is to let people experience the sanitary effects of its cosmetic products, the management is only interested in profit maximization. The management of Soleil must decide how to use the scarce material. The following information is available concerning the next period:

12-28 Selection of most profitable products. Isochlorine is produced in a chemical process that is very threatening to the environment. As a result of this, the government has limited the yearly production. Company Soleil uses isochlorine to produce four cosmetic products A, B, C, and D. Soleil has an inventory of 2,000 kg of isochlorine at a value of $20,000. As a result of production restrictions imposed on their supplier, Soleil will not be able to purchase ad- ditional isochlorine during the coming period. Although Soleil, by means of its commercial campaign, suggests that its main goal is to let people experience the sanitary effects of its cosmetic products, the management is only interested in profit maximization. The management of Soleil must decide how to use the scarce material. The following information is available concerning the next period:

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter5: Business Deductions

Section: Chapter Questions

Problem 1RP

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Refer to Exercise 13-48. Suppose that Kamber is considering building a new plant inside a foreign trade zone to replace its chemical manufacturing plant. Required: 1. How much duty will be paid per year by the factory located inside the foreign trade zone? 2. How much in duty and duty-related carrying costs will be saved by relocating inside the foreign trade zone? Kamber, Inc., owns a factory located close to, but not inside, a foreign trade zone. The plant imports volatile chemicals that are used in the manufacture of chemical reagents for laboratories. Each year, Kamber imports about 14,200,000 of chemicals subject to a 30% tariff when shipped into the United States. About 15% of the imported chemicals are lost through evaporation during the manufacturing process. In addition, Kamber has a carrying cost of 10% per year associated with the duty payment. On average, the chemicals are held in inventory for 9 months. Required: 1. How much duty is paid annually by Kamber? 2. What is the carrying cost associated with the payment of duty?
15. WalangLabel Company is a liquor company, the business has not been performing well this last few months due to the liquor ban imposed by the government. The company is considering whether it should shutdown temporarily for three months. The selling price and other costs of operating are presented below: Selling price P500 Variable manufacturing costs P280 per unit Variable selling costs P60 per unit Monthly Fixed costs: Manufacturing costs P250,000 Selling costs P120,000 Administrative costs P125,000 If the company will temporarily close it would incur P150,000 in retrenchment costs and P80,000 in reopening costs. Manufacturing costs and selling cost would not be incurred and administrative costs of P50,000…
Micron Manufacturing produces electronic equipment. This year, it produced 7,500 oscilloscopes at a manufacturing cost of $300 each. These oscilloscopes were damaged in the warehouse during storage and, while usable, cannot be sold at their regular selling price of $500 each. Management has investigated the matter and has identified three alternatives for these oscilloscopes. 1. They can be sold as is to a wholesaler for $75 each. 2. They can be disassembled at a cost of $400,000 and the parts sold to a recycler for $130 each. 3. They can be reworked and turned into good units. The cost of reworking the units will be $3,200,000, after which the units can be sold at their regular price of $500 each. Required Which alternative should management pursue? Show analysis for each alternative.
P10-7 Self-Construction Olson Machine Company manufactures small and large milling machines. Selling prices of these machines range from $35,000 to $200,000. During the 5-month period from August 1, 2019, through December 31, 2019, Olson manufactured a milling machine for its own use. This machine was built as part of the regular production activities. The project required a large amount of time from planning and supervisory person-nel, as well as that of some of the company’s officers, because it was a more sophisticated type of machine than the regular production models. Throughout the 5-month period, Olson charged all costs directly associated with the construction of the machine to a special account entitled “Asset Construction Account.” An analysis of the charges to this account as of December 31, 2019, follows:
Coyle Pharmaceuticals produces two chemicals (Chem AB, and Chem XY) used in the production of two of its most wide-selling anti-cancer drugs. Coyle Pharmaceuticals has recently received significant criticism from environmental groups, local residents, and the federal government concerning its environmental performance. The CEO of the company wants to know which product is the main source of the environmental problems. The Management Accountant has assembled the following data to help answer this question: Chem AB Chem XY Pounds of fertilizer produced 6,000,000 5,000,000 Pounds of scrap recycled 80,000 20,000 Packaging materials (kilograms) 2,400,000 1,200,000 Energy usage (kilowatt hours) 800,000 400,000 Engineering hours (process design) 18,000 12,000 Pollution control (machine hours) 300,000 75,000 Pounds of solid residues treated 90,000 30,000 Inspection hours (environmental) 30,000 15,000 Cleanup…
13. Ginocera Inc. is a designer, manufacturer, and distributor of low-cost, high-quality stainless steel kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 20Y8. In January, the company spent $600,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $1,402,000 advertising the product through these infomercials. In addition, the company incurred $819,000 in legal costs. The knives were ready for manufacture on January 1, 20Y8. Ginocera uses a job order cost system to accumulate costs associated with the kitchen knife. The unit direct materials cost for the knife is as follows: Hardened steel blanks (used for knife shaft and blade) $3.85 Wood (for handle) 1.40 Packaging 0.40 The production process is straightforward. First, the hardened steel blanks, which are purchased directly from a raw material supplier, are stamped into a single piece of metal that includes both…
The following costs were incurred by Osaka Metals Company to maintain the quality of its products.(The yen is the national currency of Japan.)1. Operating an X-ray machine to detect faulty welds, 110,000 yen2. Repairs of products sold last year, 116,000 yen3. Cost of rewelding faulty joints, 17,000 yen4. Cost of sending machine operators to a three-week training program so they could learn to use new production equipment with a lower defect rate, 18,100 yenRequired: Classify each of these costs as a prevention, appraisal, internal failure, or external failure cost.
IVB. There are four factories in the city of Gotham that are polluting the waterways. Each firm is currently producing 4 pounds of pollution; Managers will continue to pollute unless the local government intervenes. Managers will prefer to maximize economic profit by avoiding paying any costs to reduce or prevent pollution created by their business. The table below shows the marginal cost of cleaning up each pound of pollution. For example, the Gamma’s cost of cleaning up the third-pound of pollution is $180. Beta’s cost of cleaning up the first pound of pollution is $30. If Alpha cleaned up all four pounds of pollution, the total cost will be $320 (=40+40+80+160) i.e. add up the marginal cost. MARGINAL COST OF CLEANING UP POLLUTION Name of firm Alpha Beta Delta Gamma in $ in $ in $ in $ 1 st pound $40 $30 $80 $20 2 nd pound $40 $60 $90 $60 3 rd pound $80 $120 $100 $180 4 th pound…
Jojo LtdJojo Ltd manufactures products, Abbisha and Babbisha, from raw material, Zaro. The raw material is imported at a cost of R15 per kilogram from Garwe Limited, a foreign company. As a result of a fire that destroyed the warehouse of the supplier, the 2020 import of Zaro will be limited to 80% of the quantity imported in 2019.Following the restrictions on raw material imports, labour hours will, according to estimate, reduce by 10 000 hours in comparison with those worked in 2019. The management of the company, however, has decided to maintain a minimum wage rate of R6 per hour.The following is an extract from the budget for the 2020 financial year based on 95% of the available machine hours.Abbisha BabbishaSales volume in units 12 000 16 000Sales volume in rands R348 000 R512 000R RStandards per unitRaw material - Zaro 12.00 7.50Labour 4.50 3.00Overheads 3.00 5.00The budgeted, fixed manufacturing overheads for the year amount to R63 800. Overheads are allocated to production at a…
E8.1 (LO 1, 2, 3), AP HoldOn! Co. produces magnetized clips that its customers use to hang items on their refrigerator doors. In its effort to manufacture these clips, HoldOn! incurred the following costs this year (amounts are in thousands). Cost Amount Product or Period Direct or Indirect Plastic material and springs for clips $320 CEO’s salary 110 Advertising 25 Research and development 15 Wages for factory workers 420 Utility costs in plant 67 Plant supervisor salaries 186 Depreciation of plant assets 54 Salaries and commissions to salespeople 205 Required Complete the above table by classifying each cost as either a product cost or a period cost; for product costs, further classify as a direct cost or an indirect cost. Calculate total direct costs and total indirect (MOH) costs. Assume HoldOn! used a budgeted MOH rate to apply MOH costs, and the total cost applied this year is $285,000. How much did the company under-…
Shutting Down or Continuing to Operate a Plant Birch Company normally produces and sells 30,000 units of RG–6 each month. The selling price is $22 per unit, variable costs are $14 per unit, fixed manufacturing overhead costs total $150,000 per month, and fixed selling costs total $30,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG–6 units have caused Birch Company’s sales to temporarily drop to only 8,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG–6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $45,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $8,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the…
Shutting Down or Continuing to Operate a Plant Birch Company normally produces and sells 30,000 units of RG–6 each month. The selling price is $22 per unit, variable costs are $14 per unit, fixed manufacturing overhead costs total $150,000 per month, and fixed selling costs total $30,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG–6 units have caused Birch Company’s sales to temporarily drop to only 8,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG–6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $45,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $8,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the…