Financial and Managerial Accounting
15th Edition
ISBN: 9780357297162
Author: Carl S. Warren; Jefferson P. Jones; William B. Tayler, Ph.D., CMA
Publisher: Cengage Learning US
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Question
Chapter 27, Problem 1PB
1.
To determine
Comment on the purchasing policy of Company BM.
2.
To determine
Identify the additional costs involved with the bid of Company IFF beyond price, and the reasons for ignoring them.
3.
To determine
Compute the additional costs per pound for the bid of Company IFF, if the annual cost of money is 8%.
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HD Hogg Motorcycle Company manufactures a variety of motorcycles. Hogg’s purchasingpolicy requires that the purchasing agents place each quarter’s purchasing requirementsout for bid. This is because the Purchasing Department is evaluated solely by its abilityto get the lowest purchase prices. The lowest cost bidder receives the order for the nextquarter (90 days). To make its motorcycles, Hogg requires 4,500 frames per quarter. Hoggreceived two frame bids for the third quarter, as follows:• Famous Frames, Inc.: $301 per frame. Delivery schedule: 50 frames per working day(90 days in the quarter).• Iron Horse Frames Inc.: $300 per frame. Delivery schedule: 4,500 (50 frames × 90 days)frames at the beginning of July to last for three months.Hogg accepted Iron Horse Frames Inc.’s bid because it was the low-cost bid.
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Sea Blue manufactures flotation vests in Charleston, South Carolina. Sea Blue’s contribution margin income statement for the month ended December 31, 2018, contains the following data:
Suppose Overboard wishes to buy 4,600 vests from Sea Blue. Sea Blue will not incur any variable Selling and administrative expenses on the special order. The Sea Blue plant has enough unused capacity to manufacture the additional vests. Overboard has offered $15 per vest, which is below the normal sales price of $19.
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Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be
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FIXED COSTS
Year 1
Year 2
Year 3
Year 4
Year 5
ТОTALS
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200,000 P
30,000 P
230,000
Manufacturing
50,000
50,000
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Distribution
20,000
20,000
20,000
20,000
20,000
100,000
Customer Service
80,000
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20,000
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25,000
175,000 P
25,000
25,000
25,000
25,000
125,000
ТОTALS
375,000 P
125,000 P
125,000 P
115,000 P
915,000
VARIABLE COSTS PER UNIT
Manufacturing
500 P
450
450 P
450 P
450
Distribution
100
100
100
100
100
Customer Service
50
50
50
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Chapter 27 Solutions
Financial and Managerial Accounting
Ch. 27 - What is the benefit of the lean philosophy?Ch. 27 - What are some examples of non-value-added lead...Ch. 27 - Why is a product-oriented layout preferred by lean...Ch. 27 - How is setup time related to lead time?Ch. 27 - Why do lean manufacturers favor pull or make to...Ch. 27 - Why would a lean manufacturer strive to produce...Ch. 27 - How is supply chain management different from...Ch. 27 - Why does lean accounting result in fewer...Ch. 27 - Why do lean manufacturers use a raw and in process...Ch. 27 - Why is the direct labor cost category eliminated...
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