(a)
Concept introduction:
Incremental analysis: It is a decision-making technique which is used in business to determine the true cost difference between alternatives.
To find:
The incremental profit for morning sky Inc. by addition of instruction materials.
(b)
Concept introduction:
Incremental analysis: It is a decision-making technique which is used in business to determine the true cost difference between alternatives.
To find:
If the MSI adds the instruction material or sell the CDs without them.
(c)
Concept introduction:
Incremental analysis: It is a decision-making technique which is used in business to determine the true cost difference between alternatives.
To find:
If the profit will increase or decrease if demand is reduced to
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Managerial Accounting - With Access
- Looking for the break-even point from the information provided. The Smiths need to develop an analysis of their breakeven point for the plastic display case based on sales of the product directly to the consumer as well as through retailers. If the product were sold to retailers, the price would have to provide retailers with an adequate markup. Exhibit C7.4 presents the expected cost structure for the Unique Display Cases display case developed by their accountant. Based on competitive prices, the Smiths expected to offer their product in direct to consumer sales for $24.99 plus $2.99 for shipping and handling. The price to retailers would have to be negotiated but would be 30–40% less to allow an adequate markup for the retail firms. The production cost of $7.50 was based on a production run of 5000 units in one color. At 10,000 or more units, production cost would drop to $5.75 per unit. The company that would produce the plastic unit had production capacity of 25,000 units a year.…arrow_forwardRefer to the information for Smooth Move Company on the previous page. If SmoothMove accepts the order, no fixed manufacturing activities will be affected because there issufficient excess capacity.Required:1. What are the alternatives for Smooth Move?2. CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By howmuch will profit increase or decrease if the order is accepted?3. CONCEPTUAL CONNECTION Briefly explain the significance of the statement in theexercise that “existing sales will not be affected” (by the special sale).arrow_forwardConstruct a cost-volume-profit chart indicating the break-even sales for the current year, assuming that a non-cancellable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. Verify your answer, using the break-even equation. I need the chart in graogh form for thisarrow_forward
- Product pricing using the cost-plus approach methods; differential analysis for accepting additional business Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of 1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows: Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 15% return on invested assets. Instructions 1. Determine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming that the product cost method is used, determine (A) the cost amount per unit, (B) the markup percentage, and (C) the selling price of flat panel displays. 3. (Appendix) Assuming that the total cost method is used, determine (A) the cost amount per unit, (B) the markup percentage (rounded to two decimal places), and (C) the selling price of flat panel displays. (Round markup to nearest whole dollar.) 4. (Appendix) Assuming that the variable cost method is used, determine (A) the cost amount per unit, (B) the markup percentage (rounded to two decimal places), and (C) the selling price of flat panel displays. (Round markup to nearest whole dollar.) 5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays. 6. Assume that as of August 1, 3,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2,000 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On August 3, Crystal Displays Inc. received an offer from Maple Leaf Visual Inc. for 800 units of flat panel displays at 225 each. Maple Leaf Visual Inc. will market the units in Canada under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling, and administrative capacity. A. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. B. Based on the differential analysis in part (A), should the proposal be accepted?arrow_forwardExtreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the companys direct fixed costs can be avoided if a segment is dropped. This information is available for the segments. A. What will be the impact on net income if the embroidery segment is dropped? B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? C. Identify one cost that is not relevant in this analysis.arrow_forwarda) Using incremental analysis, determine if the component should be purchased from the outside supplier? Would your decision in part a) change if the company has the opportunity to rent out its facilities that it currently uses to manufacture the component for $5,500 ? Show full computations Why “Opportunity Costs” are not recorded in the financial books but are considered a relevant cost.arrow_forward
- please explain why the option is false and other options true in detail with full explanation Sing Manufacturing Company is considering an opportunity to outsource a four functioncalculator that the Company currently makes and sales. Even if the calculator is outsourced,Sing plans to continue to sell it. Also, Sing plans to continue production on other calculatormodels that are currently being made by the Company. The costs associated with making thefour function calculators include unit-level materials, labor, and overhead. In addition, thereis some facility-level overhead costs that are allocated to the product. Sing pays a 5% salcscommission on each calculator sold. Based on this information, indicate which of thefollowing statements is false.a. The materials cost is relevant to the outsourcing decision.b. The facility-level overhead cost is not relevant to the outsourcing decision.C. The sales commission is relevant to the outsourcing decision.d. It may be wise for Sing to…arrow_forwardMaking outsourcing decisions Cool Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: Another company has offered to sell Cool Systems the switch for $15.00 per unit. If Cool Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable.</p><p>Prepare an outsourcing analysis to determine whether Cool Systems should make or buy the switch.arrow_forwardOlson Corporation, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers.Instructions(a) (1) What criteria should be used to determine which of Olson’s costs are inventoriable?(2) Are Olson’s administrative costs inventoriable? Defend your answer.(b) (1) Olson uses the lower-of-cost-or-market rule for its wholesale inventories. What are the theoretical arguments for that rule?(2) The replacement cost of the inventories is below the net realizable value less a normal profit margin, which, in turn, is below the original cost. What amount should be used to value the inventories? Why?(c) Olson calculates the estimated cost of its ending inventories held for sale at retail using the conventional retail inventory method. How would Olson treat the beginning inventories and net markdowns in calculating the cost ratio used to determine its ending inventories? Why?arrow_forward
- Planning and control decisions. Gregor Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given. For each action, state whether it is a planning decision or a control decision. Gregor asks its advertising team to develop fresh advertisements to market its newest product. Gregor calculates customer satisfaction scores after introducing its newest product. Gregor compares costs it actually incurred with costs it expected to incur for the production of the new product. Gregor’s design team proposes a new product to compete directly with the Swiffer. Gregor estimates the costs it will incur to distribute 30,000 units of the new product in the first quarter of next fiscal year.arrow_forwardSuppose you are the purchasing manager for a company that manufactures scanners and other computer peripherals. Your vendor for scanner motors is now offering "quantity discounts" in the form of instant rebates and lower shipping charges as follows. Quantity Net Price Rebate Shipping 1–500 motors $16 none $1.50 501–1,000 motors 16 $1.30 1.10 1,001–2,000 motors 16 1.90 0.80 (a) Calculate the cost of the motors, including shipping charges, for each category (in $). 1–500 motors$ 501–1,000 motors$ 1,001–2,000 motors$ (b) If you usually purchase 400 motors per month, what percent would be saved per motor by ordering 800 every two months? Round to the nearest tenth of a percent. % (c) What percent would be saved per motor by ordering 1,200 every three months? Round to the nearest tenth of a percent. % (d) How much money (in $) can be saved in a year by purchasing the motors every three months instead of every month? $ (e) What other factors besides price…arrow_forwardProblem Solving.Determine for what is asked. Show your solution legibly. Improper solution will not be credited. Consider the following cost and pricing data of ABC Corp. on its Product X:Price: P120.00.per unitProfit Contribution: P90.00 Proposed additional Cost: P3 per unit (for quality improvement)Current Profits: P2.4 millionSales: 100,000 units. A. Assuming that average variable costs are constant at all output levels, find ABC Corp.’s total cost function before the proposed change.B. Calculate the total cost function if the quality improvement is implemented.C. Calculate ABC Corp.’s break-even output before and after the change, assuming it cannot increase its price.D. Calculate the increase in sales that would be necessary with the quality improvement to increase profits to P2.7 millionarrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub