MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Cost Accounting
16th Edition
ISBN: 9780134476384
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 11, Problem 11.36P
International outsourcing. Riverside Clippers Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are:
| Expected annual sales of tools (in units) | 800,000 |
| Average selling price of tools | $12 |
| Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) | 175 |
| Current exchange rate | 35NTD = 1$ |
| Variable |
$4.75 per unit |
| Incremental annual fixed manufacturing costs associated with the new product line | $400,000 |
| Variable selling and distribution costsa | $1 per unit |
| Annual fixed selling and distribution costsa | $220,000 |
a Selling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported.
- 1. Should Riverside Clippers Corp manufacture the 800,000 garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain.
Required
- 2. Riverside Clippers Corp believes that the U.S. dollar may weaken in the coming months against the New Taiwanese Dollar and does not want to face any currency risk. Assume that Riverside Clippers Corp can enter into a forward contract today to purchase 175 NTD for $5,35. Should Riverside Clippers Corp manufacture the 800,000 garden tools in the Maryland facility or purchase them from the Taiwan supplier? Explain.
- 3. What are some of the qualitative factors that Riverside Clippers Corp should consider when deciding whether to outsource the garden tools manufacturing to Taiwan?
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Yardwork Tools
Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:
Expected annual sales of tools (in units)
660,000
Average selling price of tools
$11
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)
27,300
Current exchange rate
9,100 NTD = $1
Variable manufacturing costs
$2.85 per unit
Incremental annual fixed manufacturing costs associated with the new product line
$310,000
Variable selling and distribution costsª
$0.50 per unit
Annual fixed selling and distribution costsª
$250,000
ªSelling and distribution costs are the same regardless of whether the tools…
Yardwork Tools
Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:
Expected annual sales of tools (in units)
660,000
Average selling price of tools
$11
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)
27,300
Current exchange rate
9,100 NTD = $1
Variable manufacturing costs
$2.85 per unit
Incremental annual fixed manufacturing costs associated with the new product line
$310,000
Variable selling and distribution costsª
$0.50 per unit
Annual fixed selling and distribution costsª
$250,000
ªSelling and distribution costs are the same regardless of whether the tools…
Yardwork Tools
Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:
Expected annual sales of tools (in units)
660,000
Average selling price of tools
$11
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)
27,300
Current exchange rate
9,100 NTD = $1
Variable manufacturing costs
$2.85 per unit
Incremental annual fixed manufacturing costs associated with the new product line
$310,000
Variable selling and distribution costsª
$0.50 per unit
Annual fixed selling and distribution costsª
$250,000
ªSelling and distribution costs are the same regardless of whether the tools…
Chapter 11 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Horngren's 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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