WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecurelT quoted $920,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $835,000 and $742,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $91,000. Other fixed costs are estimated to be $21,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $26/hour. a. What are the costs to insource the security services? Variable cost Fixed cost Total cost b. Do you recommend insourcing or outsourcing the security services? O Insource Outsource

WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecurelT quoted $920,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $835,000 and $742,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $91,000. Other fixed costs are estimated to be $21,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $26/hour. a. What are the costs to insource the security services? Variable cost Fixed cost Total cost b. Do you recommend insourcing or outsourcing the security services? O Insource Outsource

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 48E

See similar textbooks

Similar questions

Able Plastics, an injection-molding firm, has negotiated a contract with a national chain of department stores. Plastic pencil boxes are to be produced for a 2-year period. If the firm invests $62,000 for special removal equipment to unload the completed pencil boxes from the molding machine, one machine operator can be eliminated saving $32,000 per year. The removal equipment has no salvage value and is not expected to be used after the 2-year production contract is completed. The equipment would be serviceable for about 15 years. What is the payback period? Should Able Plastics buy the removal equipment?
Swallow Corp. has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000. The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014. Swallow Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Swallow Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Swallow Corp. expects to recover all its costs under the contract. During 2011 and 2012, the company has the following activity: 2011 2012 Costs to date 980,000 $ $2,040,000 Estimated costs to complete 3,020,000 1,960,000 Progress billings during the year 1,000,000 1,000,000 Cash collected during the year 648,000 1,280,000 On its statement of financial position at December 31, 2012, what amount will be reported for accounts…
The client and our firm have agreed on an initial estimated audit fee of $32,000. However, the estimated total cost of performing this year's audit is $37,590. Discuss possible reasons why a CPA firm might charge a new client an audit fee that is lower than the estimated first-year costs of performing the audit.
In 2016, the city of Abu Dhabi collected $24 million in fines from motorists because of traffic violations caught by red-light cameras. The cost of operating the system was $14.5 million. The net profit, that is, profit after operating costs, is split equally (that is, 50% each) between the city and the operator of the camera system. What will be the rate of return over a 3-year period to the contractor that paid for, installed, and operates the system, if its initial cost was $10 million and the profit for each of the 3 years is the same as it was in 2016? Should the company invest in this project at MARR of 15% per year?
Omni-Resistor, Incorporated specializes in waterproofing homes, office buildings and other structures. Recently it completed a waterproofing renovation for a building at a local university. The contract specifies that Omni-Resistor will receive a flat lump sum of $101,000 for the renovation, and an additional $2,600 if there is no water leaking through the roof within the first year after the renovation. The seller estimates that there is an 80% chance that no leakage will occur within the first year. Required: (a) Assuming Omni-Resistor uses the most likely value to estimate the variable consideration, calculate the transaction price. (b) Assuming Omni-Resistor determines transaction price as the “expected value” of the variable consideration, calculate the transaction price. (c) Assume Omni-Resistor uses the “expected value” approach, but is very uncertain of that estimate due to a lack of experience with similar renovations. Calculate the transaction price.
Lark Corp. has a contract to construct a P5,000,000 cruise ship at an estimated cost of P4,000,000. The company will begin construction of the cruise ship in early January 20x4 and expects to complete the project sometime in late 20x7. Lark Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Lark Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Lark Corp. expects to recover all its costs under the contract. During 20x4 and 20x5, the company has the following activity: 20x4 20x5Costs to date P 980,000 P2,040,000Estimated costs to complete 3,020,000 1,960,000Progress billings during the year 1,000,000 1,000,000Cash collected during the year 648,000 1,280,000For the year ended December 31, 20x5, how much revenue should Lark Corp. recognize on itsincome statement?P980,000P2,040,000P1,300,000P1,060,000
AgriFoods, Incorporated prepares and delivers agricultural products to industrial-scale kitchens and food service providers. One of its key customers is Home Kitchen & Company, which provides cafeteria solutions for corporations and universities. On January 1, 2024, AgriFoods obtained a one-year contract to supply a pre-specified amount of vegetables to Home Kitchen, and received $600,000 in cash. Then, on March 15, AgriFoods hired Home to run one of its employee cafeterias for a period of six months, from April to September, and paid $70,000 in cash. For similar arrangements, Home usually charged $50,000. Required: (a) Prepare the journal entries AgriFoods would record on January 1, 2024 and January 31, 2024 with respect to the sales contract. Assume revenue is accrued on a monthly basis. (b) Prepare the journal entry to account for AgriFoods’ purchase of Home’s services.
AgriFoods, Incorporated prepares and delivers agricultural products to industrial-scale kitchens and food service providers. One of its key customers is Home Kitchen & Company, which provides cafeteria solutions for corporations and universities. On January 1, 2024, AgriFoods obtained a one-year contract to supply a pre-specified amount of vegetables to Home Kitchen, and received $900,000 in cash. Then, on March 15, AgriFoods hired Home to run one of its employee cafeterias for a period of six months, from April to September, and paid $60,000 in cash. For similar arrangements, Home usually charged $40,000. A correct journal entry to account for AgriFoods' purchase of Home's services should includeoptions: A。a debit of $ 40,000 to Cafeteria Operating Expense and a debit of $20,000 to Sales Revenue B. a debit of $ 60,000 to Cafeteria Operating Expense and a debit of $20,000 to Deferred Revenue C. a debit of $60,000 to Cafeteria Operating Expense and a credit of $60,000 to Sales…
Washamoto Ltd took delivery of a microcomputer and printer on 1 July 20X6, the beginning of its financial year. The list price of the equipment was sh4,999 but Washamoto Ltd was able to negotiate a price of sh4,000 with the supplier. However, the supplier charged an additional sh340 to install and test the equipment. The supplier offered a 5% discount if Washamoto Ltd paid for the equipment and the additional installation costs within seven days. Washamoto Ltd was able to take advantage of this additional discount. The installation of special electrical wiring for the computer cost sh110. After initial testing certain modifications costing sh199 proved necessary. Staff were sent on special training courses to operate the microcomputer and this cost sh 990. Washamoto Ltd insured the machine against fire and theft at a cost of sh 49 per annum. A maintenance agreement was entered into with Sonoma plc. Under this agreement Sonoma plc. Promised to provide 24 hour breakdown cover for one…
Diamond Computers, which is owned and operated by Dale Diamond, manufactures and sells different types of computers. The company has reported profits every year since its inception in 2002 and has applied for a bank loan near the end of 2021 to upgrade manufacturing facilities. These upgrades should significantly boost future productivity and profitability. In preparing the financial statements for the year, the chief accountant, Sandy Walters, mentions to Dale that approximately $80,000 of computer inventory has become obsolete and a write-down of inventory should be recorded in 2021. Dale understands that the write-down would result in a net loss being reported for company operations in 2021. This could jeopardize the company’s application for the bank loan, which would lead to employee layoffs. Dale is a very kind, older gentleman who cares little for his personal wealth but who is deeply devoted to his employees’ well-being. He truly believes the loan is necessary for the company’s…
onca Co. is looking for financing to expand its laboratory and buys a patent for a new technology which it's going to use for the next 10 years. Ronca Co. agrees to pay $70,000 for the patent. Instead of paying cash for the patent, Ronca Co. issues a note for $100,000, which is payable in five annual installments of $20,000 each. Ronca Co. pays the seller $20,000 on the day of the contract signing. Which of the following is the amount of debt Ronca Co. is going to record in its accounting? A $20,000 B $80,000 C $100,000 D $70,000
Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $57,000 at the end of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $19,000 or will be entitled to an additional $19,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $19,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the start of the fifth month, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $19,000. Record the entry to record revenue each month for the first four months of the contract…