Sharman Athletic Gear Incorporated (SAG) is considering a special order for 15,000 baseball caps with the logo of East Texas University (ETU) to be purchased by the ETU alumni association. The ETU alumni association is planning to use the caps as gifts and to sell some of the caps at alumni events in celebration of the university's recent national championship by its baseball team. Sharman's full manufacturing cost per hat is $3.50, which includes $1.50 fixed overhead cost related to plant capacity and equipment. ETU has made a firm offer of $35,000 for the hats, and Sharman, considering the price to be far below production costs, decides to decline the offer. Required: 1-a. Determine the total cost of the special order. Total cost of the special order 1-b. In terms of maximizing short-term operating profit, did Sharman make the wrong decision in declining the offer from ETU? O Yes O No
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- Basuras Waste Disposal Company has a long-term contract with several large cities to collect garbage and trash from residential customers. To facilitate the collection, Basuras places a large plastic container with each household. Because of wear and tear, growth, and other factors, Basuras places about 200,000 new containers each year (about 20% of the total households). Several years ago, Basuras decided to manufacture its own containers as a cost-saving measure. A strategically located plant involved in this type of manufacturing was acquired. To help ensure cost efficiency, a standard cost system was installed in the plant. The following standards have been established for the products variable inputs: During the first week in January, Basuras had the following actual results: The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in January. Also, a new manufacturing process was implemented on a trial basis. The new process required a slightly higher level of skilled labor. The higher- quality material has no effect on labor utilization. However, the new manufacturing process was expected to reduce materials usage by 0.25 pound per container. Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Assume that the 0.25 pound per container reduction of materials occurred as expected and that the remaining effects are all attributable to the higher-quality material. Would you recommend that the purchasing agent continue to buy this quality, or should the usual quality be purchased? Assume that the quality of the end product is not affected significantly. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Assuming that the labor variances are attributable to the new manufacturing process, should it be continued or discontinued? In answering, consider the new processs materials reduction effect as well. Explain. 3. CONCEPTUAL CONNECTION Refer to Requirement 2. Suppose that the industrial engineer argued that the new process should not be evaluated after only one week. His reasoning was that it would take at least a week for the workers to become efficient with the new approach. Suppose that the production is the same the second week and that the actual labor hours were 9,000 and the labor cost was 99,000. Should the new process be adopted? Assume the variances are attributable to the new process. Assuming production of 6,000 units per week, what would be the projected annual savings? (Include the materials reduction effect.)Sharman Athletic Gear Incorporated (SAG) is considering a special order for 17,000 baseball caps with the logo of East Texas University (ETU) to be purchased by the ETU alumni association. The ETU alumni association is planning to use the caps as gifts and to sell some of the caps at alumni events in celebration of the university’s recent national championship by its baseball team. Sharman’s full manufacturing cost per hat is $5.00, which includes $2.50 fixed overhead cost related to plant capacity and equipment. ETU has made a firm offer of $49,000 for the hats, and Sharman, considering the price to be far below production costs, decides to decline the offer. Required: 1-a. Determine the total cost of the special order. 1-b. In terms of maximizing short-term operating profit, did Sharman make the wrong decision in declining the offer from ETU? multiple choice Yes NoGinocera Inc. is a designer, manufacturer, and distributor of custom gourment 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 an additional $1,400,000 promoting the product through these infomercials, and $800,000 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 Ninja Knife. The unit direct materials cost for the knife is: Hardened steel blanks (used for knife shaft and blade) $4.00 Wood (for handle) 1.50 Packaging 0.50 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 blade and the shaft. The stamping machine…
- Nike has just asked Linger Industries to supply 420,000 cans of balls at a special-order price of $1.10 per can. Nike wants Linger Industries to package the balls under the Nike label (Linger will imprint the Nike logo on each ball and can). As a result, Linger Industries will have to spend $10,000 to change the packaging machinery. Assuming the original volume and costs, should Linger Industries accept this special order? Yes or No?Ellison Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that each vendor’s punch press is substantially identical and each has a useful life of 20 years. In addition, Engineering has estimated that required year-end maintenance costs will be $1,000 per year for the first 5 years, $2,000 per year for the next 10 years, and $3,000 per year for the last 5 years. Following is each vendor’s sales package. Vendor A: $55,000 cash at time of delivery and 10 year-end payments of $18,000 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 20-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $10,000. Vendor B: Forty semiannual payments of $9,500…Jake’s Jerseys has been asked to produce athletic jerseys for a local school district. The special order is for 1,000 jerseys of varying sizes, and the price offered by the school district is $10 less per jersey than the normal $50 market price. The school district interested in the jerseys is one of the largest in the area. What quantitative and qualitative factors should Jake consider in making the decision to accept or reject the special order?
- Bonita Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that each vendor's punch press is substantially identical and each has a useful life of 20 years. In addition, Engineering has estimated that required year-end maintenance costs will be $1,030 per year for the first 5 years, $2,030 per year for the next 10 years, and $3,030 per year for the last 5 years. Following is each vendor's sales package. Vendor A: $58,000 cash at time of delivery and 10 year-end payments of $16,360 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 20-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $9,640. Vendor B: Forty semiannual payments of $9,120 each,…Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. Grant currently manufactures 40,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Grant wants to set the bid at $9 because she is sure that Grant will get the business at that price. Others on the executive committee of the firm object, saying that Grant would lose money on the special order at that price. Units 40,000 60,000 Manufacturing costs: Direct materials $ 80,000 $ 120,000 Direct labor 120,000 180,000 Factory overhead 240,000 300,000 Total manufacturing costs $ 440,000 $ 600,000 Unit cost $ 11 $ 10 Required 2. What is the relevant cost per unit? What do you think the minimum short-term bid price per unit should be? What would be the…McCrane Motor Company manufactures automobiles. During September 2020, the company purchased 9,000 head lamps at a cost of $10 per lamp. 70 of these lamps were used to replace the head lamps in autos used by traveling sales staff, and 8,300 lamps were put in autos manufactured during the month.Of the autos put into production during September 2020, 80% were completed and transferred to the company’s storage lot. Of the cars completed during the month, 70% were sold by September 30.(a)Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2020: Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, and Selling Expenses.
- Beginning the year 2022, the Polk Company began marketing a new beer called “Serbesa”. Each bottle of beer sells for P30. To help promote the product, the management of Polk is offering a special Serbesa beer mug to each customer for every 20 specially marked bottles of Serbesa. Polk estimates that out of the 300,000 bottles of Serbesa sold during 2022, only 30% of the bottle caps will be redeemed. For the year 2022, 5,000 beer mugs were purchased by the company at a total cost of PI40,000. These 5,000 mugs have a total sales value of P200,000. A total of 4,000 mugs were distributed to customers during the year 2022. What amount of unearned revenue for unredeemed premiums should Polk report on its December 31, 2022 statement of financial position? How much additional sales should Polk recognize upon distribution of the 4,000 mugs?Alert Inc. is a Canadian company that is specialized in the design and manufacturing of intelligent alert systems for seniors. The company sold 20,000 switches at $50 per unit in 2021, spent $20,000 for marketing campaigns, $150,000 for electricity, $250,000 for salaries, $300,000 for alert components, $10,000 for staff training, and $24,000 for rent. The company had a depreciation allowance of $10,000, a bank loan of $100,000 at an annual simple interest rate of 5% and an income tax rate of 25%. At the end of 2021, Alert Inc. possessed $320,000 as cash, $100,000 as inventory, $600,000 as equipment, $100,000 as accounts receivable and $300,000 as accounts payable. List all special costs, semi-variable and direct variable costs of the company in 2021. Produce the income statement of the company in 2021. Complete the balance sheet of the company in 2021 partially provided below. (Figure 1) Complete the cash flow statement of the company in 2021 partially provided below. (Figure 2) How…Norton Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. Norton currently manufactures 40,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Norton wants to set the bid at $7 per unit because she is sure that Norton will get the business at that price. Others on the executive committee of the firm object, saying that Norton would lose money on the special order at that price. Units 40,000Manufacturing CostsDirect Materials $ 90,000Direct Labor 100,000Factory Overhead 260,000*Total Manufacturing Cost $ 450,000Unit Cost…