COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 11, Problem 11.34P
Special order, short-run pricing. Diamond Corporation produces baseball bats for kids that it sells for $37 each. At capacity, the company can produce 54,000 bats a year. The costs of producing and selling 54,000 bats are as follows:
Cost per Bat | Total Costs | |
Direct materials | $14 | $ 756,000 |
Variable direct manufacturing labor | 4 | 216,000 |
Variable manufacturing overhead | 2 | 108,000 |
Fixed manufacturing overhead | 5 | 270,000 |
Variable selling expenses | 2 | 108,000 |
Fixed selling expenses | 3 | 162,000 |
Total costs | $30 | $1,620,000 |
- 1. Suppose Diamond is currently producing and selling 44,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Home Run Corporation wants to place a one-time special order for 10,000 bats at $21 each. Diamond will incur no variable selling costs for this special order. Should Diamond accept this one-time special order? Show your calculations.
- 2. Now suppose Diamond is currently producing and selling 54,000 bats. If Diamond accepts Home Run’s offer, it will have to sell 10,000 fewer bats to its regular customers. (a) On financial considerations alone, should Diamond accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Diamond be indifferent between accepting the special order and continuing to sell to its regular customers at $37 per bat. (c) What other factors should Diamond consider in deciding whether to accept the one-time special order?
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Slugger Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows:
Cost per Bat
Total costs
Direct materials
$13
$650,000
Direct manufacturing labor
5
250,000
Variable manufacturing overhead
2
100,000
Fixed manufacturing overhead
6
300,000
Variable selling expenses
3
150,000
Fixed selling expenses
2
100,000
Total costs
$31
$1,550,000
Additional information:
Suppose Slugger is currently producing and selling 40,000 bas. At this level of production and sales, its fixed costs are the same as given in preceding table.
Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each.
Suppose Slugger will incur no variable selling costs for this special order.
Q2-2. List all assumptions when Slugger makes the special order decision.
Slugger Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows:
Cost per Bat
Total costs
Direct materials
$13
$650,000
Direct manufacturing labor
5
250,000
Variable manufacturing overhead
2
100,000
Fixed manufacturing overhead
6
300,000
Variable selling expenses
3
150,000
Fixed selling expenses
2
100,000
Total costs
$31
$1,550,000
Additional information:
Suppose Slugger is currently producing and selling 40,000 bas. At this level of production and sales, its fixed costs are the same as given in preceding table.
Bench Corporation wants to place a one-time special order for 10,000 bats at $23 each.
Suppose Slugger will incur no variable selling costs for this special order.
Q2-2. List all assumptions when Slugger makes the special order decision.
Q2-3. Should Slugger accept this…
Careless Company manufactures and sells sunglasses. Price and cost data are as follows:
Selling price per pair of sunglasses P25.00
Variable costs per pair of sunglasses:
Raw materials P11.00
Direct labor P5.00
Manufacturing overhead P2.50
Variable Selling expenses P1.30
Annual fixed costs:
Manufacturing overhead P192,000
Selling and administrative P276,000
Careless Company estimates that its direct labor costs will increase 8 percent next year. How
many units will Careless Company have to sell next year to reach breakeven?
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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