COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 11, Problem 11.22E
Relevant and irrelevant costs. Answer the following questions.
- 1. Robinson Computers makes 5,700 units of a circuit board, CB76, at a cost of $230 each. Variable cost per unit is $180 and fixed cost per unit is $50. Peach Electronics offers to supply 5,700 units of CB76 for $210. If Robinson buys from Peach, it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Robinson accept Peach’s offer? Explain.
- 2. RT Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information:
| Old Machine | New Machine | |
| Original cost | $10,800 | $8,800 |
| Useful life | 9 years | 5 years |
| Current age | 4 years | 0 years |
| Remaining useful life | 5 years | 5 years |
| $4,800 | Not acquired yet | |
| Book value | $6,000 | Not acquired yet |
| Current disposal value (in cash) | $2,800 | Not acquired yet |
| Terminal disposal value (5 years from now) | $0 | $0 |
| Annual cash operating costs | $18,000 | $15,000 |
RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should RT Manufacturing replace the old machine? Explain.
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Relevant and irrelevant costs:
1. DeCesare Computers makes 5,200 units of a circuit board, CB76 at a cost of $280 each. Variable cost per unit is $190 and fixed cost per unit is $90. Peach Electronics offers to supply 5,200 units of CB76 for $260. If DeCesare buys from Peach it will be able to save $10 per unit in fixed costs but continue to incur the remaining $80 per unit. Should DeCesare accept Peach’s offer? Explain.
2. LN Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information:
Old Machine
New Machine
Original cost
$10,700
$9,000
Useful life
10 years
3 years
Current
age 7 years
0 years
Remaining useful life
3 years
3 years
Accumulated depreciation
$7,490
Not acquired yet
Book value
$3,210
Not acquired yet
Current disposal value (in cash
) $2,200
Not acquired yet
Terminal disposal value (3 years from now)
$0
$0
Annual cash operating costs
$17,500…
Answer the following questions.
1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach
Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the
remaining $30 per unit. Should Douglas accept Peach's offer? Explain.
1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach
Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the
remaining $30 per unit. Should Douglas accept Peach's offer? Explain.
Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.)
Make
Buy
Relevant costs:
Unit relevant cost
Douglas…
Answer the following questions.
Required
1. Deibler Computers makes 5,600 units of a circuit board, CB76, at a cost of $210 each. Variable cost per unit is $150, and fixed
cost per unit is $60. HT Electronics offers to supply 5,600 units of CB76 for $185. If Deibler buys from HT, it will be able to save
$25 per unit of fixed costs but continue to incur the remaining $35 per unit. Should Deibler accept HT's offer? Explain.
2. QT Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information:
(Click the icon to view the information.)
QT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should QT replace the
old machine? Explain.
A
Requirement 1. Deibler Computers makes 5,600 units of a circuit board, CB76, at a cost of $210 each. Variable cost per unit is $150, and fixed cost per unit is $60.
HT Electronics offers to supply 5,600 units of CB76 for $185. If Deibler buys from HT, it will be able to…
Chapter 11 Solutions
COST ACCOUNTING
Ch. 11 - Prob. 11.1QCh. 11 - Define relevant costs. Why are historical costs...Ch. 11 - All future costs are relevant. Do you agree? Why?Ch. 11 - Distinguish between quantitative and qualitative...Ch. 11 - Describe two potential problems that should be...Ch. 11 - Variable costs are always relevant, and fixed...Ch. 11 - A component part should be purchased whenever the...Ch. 11 - Prob. 11.8QCh. 11 - Managers should always buy inventory in quantities...Ch. 11 - Management should always maximize sales of the...
Ch. 11 - Prob. 11.11QCh. 11 - Cost written off as depreciation on equipment...Ch. 11 - Managers will always choose the alternative that...Ch. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Qualitative and quantitative factors. Which of the...Ch. 11 - Special order, opportunity cost. Chade Corp. is...Ch. 11 - Prob. 11.18MCQCh. 11 - Keep or drop a business segment. Lees Corp. is...Ch. 11 - Relevant costs. Ace Cleaning Service is...Ch. 11 - Disposal of assets. Answer the following...Ch. 11 - Relevant and irrelevant costs. Answer the...Ch. 11 - Multiple choice. (CPA) Choose the best answer. 1....Ch. 11 - Special order, activity-based costing. (CMA,...Ch. 11 - Make versus buy, activity-based costing. The...Ch. 11 - Inventory decision, opportunity costs. Best Trim,...Ch. 11 - Relevant costs, contribution margin, product...Ch. 11 - Selection of most profitable product. Body Image,...Ch. 11 - Theory of constraints, throughput margin, relevant...Ch. 11 - Closing and opening stores. Sanchez Corporation...Ch. 11 - Prob. 11.31ECh. 11 - Relevance of equipment costs. Janets Bakery is...Ch. 11 - Equipment upgrade versus replacement. (A. Spero,...Ch. 11 - Special order, short-run pricing. Diamond...Ch. 11 - Short-run pricing, capacity constraints. Fashion...Ch. 11 - International outsourcing. Riverside Clippers Corp...Ch. 11 - Relevant costs, opportunity costs. Gavin Martin,...Ch. 11 - Opportunity costs and relevant costs. Jason Wu...Ch. 11 - Opportunity costs. (H. Schaefer, adapted) The Wild...Ch. 11 - Make or buy, unknown level of volume. (A....Ch. 11 - Make versus buy, activity-based costing,...Ch. 11 - Prob. 11.42PCh. 11 - Product mix, special order. (N. Melumad, adapted)...Ch. 11 - Theory of constraints, throughput margin, and...Ch. 11 - Theory of constraints, contribution margin,...Ch. 11 - Closing down divisions. Ainsley Corporation has...Ch. 11 - Dropping a product line, selling more tours....Ch. 11 - Prob. 11.48PCh. 11 - Dropping a customer, activity-based costing,...Ch. 11 - Equipment replacement decisions and performance...
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- Answer the following questions. 1. Dalton Computers makes 5,500 units of a circuit board, CB76 at a cost of $250 each. Variable cost per unit is $170 and fixed cost per unit is $80. Peach Electronics offers to supply 5,500 units of CB76 for $230. If Dalton buys from Peach it will be able to save $15 per unit in fixed costs but continue to incur the remaining $65 per unit. Should Dalton accept Peach's offer? Explain. 2. TX Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: (Click the icon to view the information.) TX Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should TX Manufacturing replace the old machine? Explain. Relevant COSIS. Variable costs per unit Avoidable fixed costs per unit Purchase price per unit Unit relevant cost Cash operating costs Current disposal value of old machine Cost of new machine $ Total relevant costs 170 15 $ 185 $ 230 230 Dalton Computers should…arrow_forwardAnswer the following question Required Dowling Computers makes 5,100 units of a circuit board, CB76, at a cost of $290 each. Variable cost per unit is $190 and fixed cost per unit is $100. HT Electronics offers to supply 5,100 units of CB76 for $270. If Dowling buys from HT it will be able to save $20 per unit of fixed costs but continue to incur the remaining $80 per unit. Should Dowling accept HT's offer? Explain. Dowling Computers makes 5.100 units of a circuit board, CB76, at a cost of $290 each. Variable cost per unit is $190 and fixed cost per unit is $100, HT Electronics offers to supply 5.100 units of CB76 for $270, If Dowling buys from HT it will be able to save $20 per unit of fixed costs but continue to incur the remaining Ş80 per unit. Should Dowling accept HT's offer? Explain. Begin by calculating the relevant cost per unit. (Only complete the necessary answer boxes.) Make Buy Relevant costs: Unit relevant cost Dowling Computers should V HT's offer. When comparing relevant…arrow_forward3. Tri-products is trying to decide whether to make-or-buy an accessory item for one of their products. It is projected that this item will sell for $10 each. If the item is outsourced, there is virtually no cost other than the $6 per unit that they would pay their supplier. Internally, they have two choices. equipment, but results in a $4 per unit cost. but its per unit cost is $5. Regardless of whether the item is subcontracted or produced internally, there is a 60% chance that they will sell 50,000 units, and a 40% chance that they will sell 100,000 units. Draw the decision tree appropriate to the alternatives and outcomes stated. Using decision trees and EMV, what is their best choice? Process A requires an investment of $120,000 for design and Process B requires only a $100,000 investment,arrow_forward
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- Question Help Answer the following questions. Required 1. Dalton Computers makes 5,500 units of a circuit board, CB76, at a cost of $280 each. Variable cost per unit is $160 and fixed cost per unit is $120. HT Electronics offers to supply 5,500 units of CB76 for $260. If Dalton buys from HT it will be able to save $20 per unit of fixed costs but continue to incur the remaining $100 per unit. Should Dalton accept HT's offer? Explain. 2. OK Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: E (Click the icon to view the information.) OK Manufacturing uses straight-line amortization. Ignore the time value of money and income taxes. Should OK replace the old machine? Explain. Requirement 1. Dalton Computers makes 5,500 units of a circuit board, CB76, at a cost of $280 each. Variable cost per unit is $160 and fixed cost per unit is $120. HT Electronics offers to supply 5,500 units of CB76 for $260. If Dalton buys from HT it will be…arrow_forwardCarmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce. How do we calculate the differential cost of producing Product D?arrow_forwardCarmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce. What is the differential revenue of producing Product D?arrow_forward
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