COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 3, Problem 3.31E
CVP analysis, international cost structure differences. Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the three countries.
- 1. Compute the breakeven point for Braided Rugs, Inc., in each country in (a) units sold and (b) revenues.
Required
- 2. If Braided Rugs, Inc., plans to produce and sell 80,000 rugs in 2017, what is the budgeted operating income for each of the three manufacturing locations? Comment on the results.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company
has received a bid from a supplier in Vietnam to produce 8,900 units per year for $7.50 each. Mohave the following information about
the cost of producing tote bags:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total cost per unit
Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is
unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags.
Required:
1. Compute the difference in cost between making and buying the umbrella tote bag.
2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them?
3-a. Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000
in…
Company E has two divisions, Division A and Division B. Division A is currently
buying Component X from an external seller for $12. Division B produces
Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A
purchased Component X from Division B at the market-based transfer price?
• Variable cost per unit $10
• Fixed cost per unit 1.16
• Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price?
Variable cost per unit $6.31
Fixed cost per unit 1.36
Division B sales price of Component X 14.5
Chapter 3 Solutions
COST ACCOUNTING
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) 10,000 15 8 5 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 10,000 valves per year from an overseas supplier at a cost of $14 per valve. 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the intermediate market. Also assume that $2 in variable expenses can be avoided on transfers within the company, due to reduced selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? Transfer price 4. Assume the Pump Division needs 20,000 special high-pressure valves per year. The Valve Division's variable costs to manufacture and ship the special valve would be $10 per…arrow_forwardKhan Ltd. has two divisions, Europe and Asia. Europe produces a ball bearing that Asia uses in its production. Europe's variable cost is $2 per unit and the fixed cost per unit is $1.50. Ball bearings sell on the open market for $6 each. If Europe has excess capacity, what would be the minimum transfer price if Asia currently is purchasing 100,000 units on the open market?arrow_forwardDivision A makes a part with the following characteristics: **SEE IMAGE TO SEE DETAILS** a} Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 15,000 units to its outside customers. What should be the lowest acceptable transfer price from the perspective of Division A? b] Refer back to your answer in the last problem. Division B is now purchasing these parts from an outside supplier at a price of $24 each. If Division B begins to purchase the 5,000 parts from Division A rather than the outside supplier, what is the company as a whole change in net income? ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS c) Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 15,000 units to its outside customers. IF the transfer is made, variable costs will decrease by $2 per…arrow_forward
- Required information [The following information applies to the questions displayed below.] Tall Pines Brewery (TPB) makes two specialty beers in its microbrewery: Golden Ale and Dark Ale. Both beers sell for the same price per case in the U.S. market and in the export market. The latter market is primarily European countries. Both beers also have the same variable production costs, though the export product has slightly higher variable costs due to shipping and other distribution costs associated with the export beers. The price, cost, and market information for the two beers are shown below: Budgeted Weighted Average CM Budgeted Actual Sales units (cases) 29,000 19,000 29,350 21,500 Domestic Export Total 48,000 50,850 Price per case Domestic $ 102 $ 101 Export Variable cost per case 104 106 Domestic Export Contribution margin per case Domestic Export Total contribution margin $ 69 $ 69 82 75 $ 33 $32 22 31 Domestic $ 957,000 $ 939, 200 Export 418,000 666, 500 $ 28.6458 Industry Budget…arrow_forwardDivision A makes a part with the following characteristics: **SEE IMAGE TO SEE DETAILS** a} Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 15,000 units to its outside customers. What should be the lowest acceptable transfer price from the perspective of Division A? b] Refer back to your answer in the last problem. Division B is now purchasing these parts from an outside supplier at a price of $24 each. If Division B begins to purchase the 5,000 parts from Division A rather than the outside supplier, what is the company as a whole change in net income? c) Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 15,000 units to its outside customers. IF the transfer is made, variable costs will decrease by $2 per unit. What should be the lowest acceptable transfer price…arrow_forwardRequired information [The following information applies to the questions displayed below] Tall Pines Brewery (TPB) makes two specialty beers in its microbrewery: Golden Ale and Dark Ale. Both beers sell for the same price per case in the U.S. market and in the export market. The latter market is primarily European countries. Both beers also have the same variable production costs, though the export product has slightly higher variable costs due to shipping and other distribution costs associated with the export beers. The price, cost, and market information for the two beers are shown below: Sales units (cases) Domestic Export Total Price per case Domestic Export Variable cost per case Domestic Export Contribution margin per case Domestic Export Total contribution margin Domestic Export Sales units (cases) Domestic Export 1. Market share variance 2. Market size variance 3. Selling price variance Sales volume variance $ 4. Sales mix variance $ Sales quantity variance $ Budgeted Industry…arrow_forward
- Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8.200 units per year for $9.50 each Mohave the following information about the cost of producing tote bags: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 60 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags Required: 1. Compute the difference in cost between making and buying the umbrella tote bag 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-0. Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $10,000 in annual…arrow_forwardMaterials used by Best Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit. If the negotiated price approach is used, what would be the range of acceptable transfer prices?arrow_forwardMaterials used by Angela Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit. 1. Assuming transfer price of $25, how much would the income from operations of Division B increase? 2. If the negotiated price approach is used, what would be the range of acceptable transfer prices?arrow_forward
- Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers Variable cost per unit Total fixed costs Capacity in (units) Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $74 per unit and would substitute the part made by Division A. Division B requires 5,200 units of the part each period. Division A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A? e to search Multiple Choice $71 $77 4 $ 77 $ 55 $ 432,000 27,000 O Ai 21. 37°F Cloudy ^4.arrow_forward(Location Strategies) A merchant wants to open an oil shop in the United States area with a choice of Las Vegas, San Fransisco or New York areas. Each of these area options has a local supplier providing a price quote for this oil as detailed in the table below. Area Fixed Cost (In $ ) Variable Cost (In $) per can Las Vegas 5,500,000.00 55,574.00 San Fransisco 11,500,000.00 35,500.00 New York 21,500,000.00 15,500.00 Question: How much volume must be filled in order to obtain economic value per area? Determine the volume range for each area. Sketch a crossover chart that illustrates these conditions If in the end the merchant wants to sell as many as 600 cans at a selling price of Rp. 60,000 per can, calculate the profit from each area. Where did the merchant finally determine his location?arrow_forwardQuestion No. 1. A firm is evaluating the alternative of manufacturing a part that is currently being outsourced from a supplier. The relevant information is provided below: For in-house manufacturing, using this information, determine the break-even quantity for which the firm would be indifferent between manufacturing the part in-house or outsourcing it. Given: Annual fixed cost = P2,250,000.00 Variable cost per part = P7,000.00 For purchasing from supplier Purchase price per part = P8,000.00 Question No. 2. In relation to the previous question answer the following: If demand is forecast to be greater than 2,500 parts, should the firm make the part in-house or purchase it from a supplier? The marketing department forecasts that the upcoming year’s demand will be 2,500 units. A new supplier offers to make parts for P7,500.00 each. Should the company accept the offer? What is the maximum price per part the manufacturer should be willing to pay to the supplier if the forecast…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
What is Transfer Pricing for Small Businesses?; Author: Nomad Capitalist;https://www.youtube.com/watch?v=_Q6nN3s1Xjs;License: Standard Youtube License