2016 2017 Units of X400 produced and sold 12,000 13,800 Selling price $145 $140 Direct materials (square feet) 36,000 34,800 Direct manufacture costs per square foot $13 $15 Manufacturing capacity for X400 (units) 14,000 13,900 Total conversion costs $406,000 $403,100 Conversion costs per units of capacity $29 $29 Calculate the operating income in 2016 and 2017.

2016 2017 Units of X400 produced and sold 12,000 13,800 Selling price $145 $140 Direct materials (square feet) 36,000 34,800 Direct manufacture costs per square foot $13 $15 Manufacturing capacity for X400 (units) 14,000 13,900 Total conversion costs $406,000 $403,100 Conversion costs per units of capacity $29 $29 Calculate the operating income in 2016 and 2017.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 9PB: ZZOOM, Inc., has decided to discontinue manufacturing its Z Best model. Currently, the company has...

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Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,600 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $20 for materials and $20 for direct labor. In addition, $7 of variable overhead and $32 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. Il Trifecta completes the X Plus models, it can sell them for $160 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $104 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta should complete the X Plus models or sell them in their current state.
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
CR Company makes a household appliance with model number E400. The goal for 2017 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of E400 units that can be produced. The following additional data are available for 2016 and 2017: 2016 2017 Units of E400 produced and sold 12,000 13,800 Selling price $145 $140 Direct materials (square feet) 36,000 34,800 Direct manufacture costs per square foot $13 $15 Manufacturing capacity for X400 (units) 14,000 13,900 Total conversion costs $406,000 $403,100 Conversion costs per units of capacity $29 $29 Calculate the amount for growth, price-recovery, and productivity component that explain the change in operating income from 2016 to 2017.
Berlin Corp. makes a special-purpose machine called HTW used in the textile industry. Berlin Corp. has designed the HTW machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Berlin Corp. presents the following data for 2016 and 2017.)(see picture) Berlin Corp. produces no defective machines, but it wants to reduce direct materials usage per HTW machine in 2017. Conversion costs in each year depend on production capacity defined in terms of HTW units that can be produced, not the actual units produced. Selling and customer- service costs depend on the number of customers that Berlin Corp. can support, not the actual number of customers it serves. Berlin Corp. has 75 customers in 2016 and 80 customers in 2017. 2(a). Calculate the growth component from 2016 to 20172(b). Calculate the price-recovery component from 2016 to 2017 2(c). Calculate the growth productivity component from 2016 to 2017
Ratliff Appliances Company makes a household appliance with model number RM16. The goal for 2020 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of RM16 units that can be produced. The industry market size for appliances increased 10% from 2019 to 2020. The following additional data are available for 2019 and 2020: 2019 2020 Units Produced & Sold 33,000 37,950 Selling Price $ 360 $ 345 Direct Materials (square feet) 82,500 87,000 Direct Material Costs per square foot $ 31 $ 33 Manufacturing capacity (units) 41,250 39,850 Total Conversion Costs $ 866,250 $ 797,000 Conversion Costs per unit of capacity $ 21 $ 20 Ignoring the market growth, but considering your answer to question (a), how much of Ratliff Co’s change in income from 2019 to 2020 is due to a cost leadership strategy?
Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows:Revenues $5,000,000 Variable costs 3,250,000 Fixed costs 1,890,000 Operating income $ (140,000) Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitability. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to reduce costs. After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would expose the company to potential environmental liabilities. He tells Leroy, “We would need to estimate some of these potential environmental costs and include them in…
Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows:Revenues $5,000,000 Variable costs 3,250,000 Fixed costs 1,890,000 Operating income $ (140,000) Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitability. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to reduce costs. After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would expose the company to potential environmental liabilities. He tells Leroy, “We would need to estimate some of these potential environmental costs and include them in…
Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows:Revenues $5,000,000 Variable costs 3,250,000 Fixed costs 1,890,000 Operating income $ (140,000) Joshua Kirby, Megaphone’s president, is very concerned about Megaphone Corporation’s poor profitability. He asks Leroy Gibbs, production manager, and Tony DiNunzo, controller, to see if there are ways to reduce costs. After 2 weeks, Leroy returns with a proposal to reduce variable costs to 55% of revenues by reducing the costs Megaphone currently incurs for safe disposal of wasted plastic. Tony is concerned that this would expose the company to potential environmental liabilities. He tells Leroy, “We would need to estimate some of these potential environmental costs and include them in…
Heyer Appliances assembles dishwashers at its plant in Tuscaloosa, Alabama. In February 2017, 60 circulation motors that cost $110 each (from a new supplier who subsequently went bankrupt) were defective and had to be disposed of at zero net disposal value. Heyer Appliances was able to rework all 60 dishwashers by substituting new circulation motors purchased from one of its existing suppliers. Each replacement motor cost $125. Q. What other costs might Heyer Appliances include in its analysis of the total costs of rework due to the circulation motors purchased from the (now) bankrupt supplier?
Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017: a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 c. Cost of indirect materials, $234,000 d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000 e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900 f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.) g. Plant management, plant rent, and plant insurance, $498,000 1. Classify each of the preceding costs…
Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017: a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 c. Cost of indirect materials, $234,000 d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000 e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900 f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.) g. Plant management, plant rent, and plant insurance, $498,000 Q1. How is the cost hierarchy helpful…
Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017: a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 c. Cost of indirect materials, $234,000 d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000 e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900 f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.) g. Plant management, plant rent, and plant insurance, $498,000 Q1. Consider two types of elliptical…

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bartleby, a Learneo, Inc. business

	2016	2017
Units of X400 produced and sold	12,000	13,800
Selling price	$145	$140
Direct materials (square feet)	36,000	34,800
Direct manufacture costs per square foot	$13	$15
Manufacturing capacity for X400 (units)	14,000	13,900
Total conversion costs	$406,000	$403,100
Conversion costs per units of capacity	$29	$29