MANAGERIAL ACCOUNTING F/MGRS.
6th Edition
ISBN: 9781264100590
Author: Noreen
Publisher: RENT MCG
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Chapter 6A, Problem 6A.11P
1.
To determine
Introduction: The difference in costs between the variable alternative is used to calculate financial advantage and disadvantage.
To calculate: The maximum amount the company will be willing to pay To S manufacturer for machine.
2.
To determine
Introduction: The difference in costs between the variable alternative is used to calculate financial advantage and disadvantage.
To compute: The price of the machine on the return on investment, and prepare a graph showing the effect of change in price on ROI
3.
To determine
Introduction: The difference in costs between the variable alternative is used to calculate financial advantage and disadvantage.
The some of the ideas for introducing the S machine
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It costs Concord Company $26 per unit ($18 variable and $8 fixed)
to produce its product, which normally sells for $38 per unit. A
foreign wholesaler offers to purchase 6400 units at $21 each.
Concord would incur special shipping costs of $2 per unit if the
order were accepted. Concord has sufficient unused capacity to
produce the 6400 units. If the special order is accepted, what will
be the effect on net income?
O $6400 decrease
O $19200 increase
O $115200 increase
O $6400 increase
Target Costing
National Restaurant Supply, Inc., sells restaurant equipment and supplies throughout most of the United States. Management is considering adding a machine that makes sorbet to its line of ice cream making machines. Management will negotiate the purchase price of the sorbet machine with its Swedish manufacturer.
Management of National Restaurant Supply believes the sorbet machine can be sold to its customers in the United States for $4,950. At that price, annual sales of the sorbet machine should be 100 units. If the sorbet machine is added to National Restaurant Supply’s product lines, the company will have to invest $600,000 in inventories and special warehouse fixtures. The variable cost of selling the sorbet machines would be $650 per machine.
Required:
1. If National Restaurant Supply requires a 15% return on investment (ROI), what is the maximum amount the company would be willing to pay the Swedish manufacturer for the sorbet machines?
2. The manager who is flying…
Structuring a Special-Order Problem
The Millenium Company has been approached by a new customer with an offer to purchase 10,000 units of its model F80 at a price of $4.10 each. The new customer is geographically separated from the company's other customers, and existing sales would not be affected. Millenium normally produces 75,000 units of F80 per year but only plans to produce and sell 60,000 in the coming year. The normal sales price is $12 per unit. Unit cost information for the normal level of activity is as follows:
Direct materials
$1.75
Direct labor
2.50
Variable overhead
1.50
Fixed overhead
3.25
Total
$9.00
Fixed overhead will not be affected by whether or not the special order is accepted.
Required:
1. Should the company accept or reject the special order?
2. By how much will operating income increase or decrease if the order is accepted? by
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