Anna Garden recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Anna has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Anna is unable to carry all varieties of kits originally assembled and must choose between two basic packages.
The basic introductory kit includes undyed, uncut reeds (with dye included) for weaving one basket. This basic package costs Anna $16 and sells for $30. The second kit, called Stage 2, includes cut reeds that have already been dyed. With this kit the customer need only soak the reeds and weave the basket. Anna is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her own time, which she values at $18 per hour. Because she is more efficient at cutting and dying reeds than her average customer, Anna is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The Stage 2 kit sells for $36.
Instructions
Determine whether Annas basketweaving studio should carry the basic introductory kit with undyed and uncut reeds or the Stage 2 kit with reeds already dyed and cut. Prepare an incremental analysis to support your answer.
Want to see the full answer?
Check out a sample textbook solutionChapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
- The Ferndale Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, mirrors, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Ken McMann, who has one full-time employee working for him. Ken has worked in this industry for many years and has just started the company. Currently, for customer pricing inquiries, Ken provides a quote based on his best estimate and years of experience in the business and applies a 40% markup on cost. Ken’s son Owen has returned home for the summer after completing his first semester of an accounting program. Owen described to Ken the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Ken believes he could use this cost accounting system in his new business and sets aside a few hours to…arrow_forwardRoberta Coy makes custom mooring covers for boats. Each mooring cover is hand sewn to fit a particular boat. If covers are made for two or more identical boats, each successive cover generally requires less time to make. Coy has been approached by a local boat dealer to make mooring covers for all of the boats sold by the dealer. Coy has developed the following cost schedule for mooring covers made to fit 17-foot outboard power boats. Mooring Covers Made         Total Cost of Covers        1 ........................................................ $ 450        2 ............................................................ 850        3 ........................................................ 1,210        4 ........................................................ 1,540        5 ........................................................ 1,850 6. $370 Required:      Compute the following:1. Marginal cost of second mooring cover.2. Marginal…arrow_forwardCarmen is the manager of an office furniture company. Instead of producing all the office furniture items itself, her company imports prepackaged office furniture. For individual customers, the company assembles the items ordered and ships them to the client with a markup. The company also sells its prepackaged units to retailers like Office Depot in flat packages. For these retail sales, the company has to ensure that the correct pieces are in the prepackaged units. It also needs to provide assembly instructions and the assembly kit (e.g. nails, screws, washers, bolts, and nuts). One of Carmen's jobs is to monitor the costs of these prepackaged units. She also manages the inventory levels of both the furniture items and the installation kits. She collected the following data sets for the top five most popular items. Furniture Company Kit data set. Product ID is the product identifier. Each product has an assembly kit based on the ID number. To ensure that the company always has the…arrow_forward
- Carmen is the manager of an office furniture company. Instead of producing all the office furniture items itself, her company imports prepackaged office furniture. For individual customers, the company assembles the items ordered and ships them to the client with a markup. The company also sells its prepackaged units to retailers like Office Depot in flat packages. For these retail sales, the company has to ensure that the correct pieces are in the prepackaged units. It also needs to provide assembly instructions and the assembly kit (e.g. nails, screws, washers, bolts, and nuts). One of Carmen's jobs is to monitor the costs of these prepackaged units. She also manages the inventory levels of both the furniture items and the installation kits. She collected the following data sets for the top five most popular items. Furniture Company Kit data set. Product ID is the product identifier. Each product has an assembly kit based on the ID number. To ensure that the company always has the…arrow_forwardPacific Decor, Inc., designs, manufactures, and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much of the past month working on the design of a high-end dining room table. The design has been well-received by Jose Alvarez, the product development manager. However, Alvarez wants to make sure that the table can be priced competitively. Amy Hoover, Pacific's cost accountant, presents Alvarez with the following cost data for the expected production of 200 tables: Design cost $ 5,000 Direct materials 120,000 Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 142,000 64,000 46,500 Marketing 15,000 1. Alvarez thinks that Pacific can successfully market the table for $2,000. The company's target operating income is 10% of revenue. Calculate the target full cost of producing the 200 tables. Does the cost estimate developed by Hoover meet Pacific's requirements? Is value engineering needed? 2. Alvarez discovers…arrow_forwardCoastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments. The Assembly Department purchases components form vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for sale after completing the assembly process. The model E60 undergoes further process in Customization department, which is actually just a small area in the same building as the Assembly Department. Conversion costs in both the Assembly Department and Customization Department are based on the number of units produced. There are never any work-in-process inventories. Data for production in November are shown in the following table.                                                                                 Total                  E20                     E35                    E60 Units produced…arrow_forward
- Coastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments. The Assembly Department purchases components from vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for sale after completing the assembly process. The model E60 undergoes further process in Customization Department, which is actually just a small area in the same building as the Assembly Department.  Conversion costs in both the Assembly Department and Customization Department are based on the number of units produced. There are never any work-in-process inventories. Data for production in November are shown in the following table.    Total  E20  E35  E60  Units produced  13,000   5,000   4,500   3,500   Materials cost $ 9,820,000  $ 2,500,000  $ 3,420,000  $ 3,900,000  Conversion costs             Assembly…arrow_forwardCoastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments. The Assembly Department purchases components from vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for sale after completing the assembly process. The model E60 undergoes further process in Customization Department, which is actually just a small area in the same building as the Assembly Department.  Conversion costs in both the Assembly Department and Customization Department are based on the number of units produced. There are never any work-in-process inventories. Data for production in November are shown in the following table.    Total  E20  E35  E60  Units produced  11,500   4,500   4,000   3,000   Materials cost $ 8,590,000  $ 2,250,000  $ 3,040,000  $ 3,300,000  Conversion costs             Assembly…arrow_forwardCoastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments. The Assembly Department purchases components from vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for sale after completing the assembly process. The model E60 undergoes further process in Customization Department, which is actually just a small area in the same building as the Assembly Department.  Conversion costs in both the Assembly Department and Customization Department are based on the number of units produced. There are never any work-in-process inventories. Data for production in November are shown in the following table.   Total   E20   E35    E60   Units produced  11,500   4,500   4,000    3,000   Materials cost $ 8,395,000  $ 2,250,000  $ 2,845,000   $ 3,300,000   Conversion costs…arrow_forward
- st K Yard Growers 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 conceming the decision are (Click the icon to view the data.) Read the requirements Requirement 1. Should Yard Growers Corp manufacture the 680,000 garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain The cost of manufacturing 680,000 garden tools in the Maryland facility is 680,000 garden tools from the Taiwan supplier is and the cost of purchasing Yard Growers Corp purchase the garden tools from the Talwan supplier because it is than the relevant costs to manufacture the garden tools in Maryland SKIP REQUIREMENT 2 Requirement 3. What are some of the qualitative factors…arrow_forwardSylvan Creations designs, manufactures, and sells modern wood sculptures. Sandra Johnson is an artist for the company. Johnson has spent much of the past month working on the design of an intricate abstract piece. Jim Chase, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Ellen Cooper, Sylvan’s cost accountant, presents Chase with the following cost data for the expected production of 75 sculptures: Design cost $10,000 Direct materials 80,000 Direct manufacturing labor 27,500 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 42,500 Fixed marketing costs 17,500 Q.What challenges might managers at Sylvan Creations encounter in achieving the target cost and how might they overcome these challenges?arrow_forwardSylvan Creations designs, manufactures, and sells modern wood sculptures. Sandra Johnson is an artist for the company. Johnson has spent much of the past month working on the design of an intricate abstract piece. Jim Chase, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Ellen Cooper, Sylvan’s cost accountant, presents Chase with the following cost data for the expected production of 75 sculptures: Design cost $10,000 Direct materials 80,000 Direct manufacturing labor 27,500 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 42,500 Fixed marketing costs 17,500 Q.Chase believes that competition will require Sylvan to reduce the price of the sculpture to $2,800. Rather than using the highest-grade wood available, Sylvan could use standard grade wood and lower the cost of direct materials by 25%. This redesign will require an additional $1,500 of design cost. Will this design change allow…arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College