Concept explainers
Bristol is developing material standards for her company. The operations manager wants grade A plastic tops because they are the easiest to work with and are the quality the customers want. Grade B will not work because customers do not want the lower grade, and it takes more time to assemble the product than with grade A materials. Bristol calls several suppliers to get prices for the plastic top. All are within $0.10 of each other. Since the company will use millions of the plastic tops, she decides that the $0.10 difference is important. The supplier who has the lowest price is known for delivering late and low- quality materials. Bristol decides to use the supplier who is $0.04 more but delivers on time and at the right quality. This supplier charges $0.52 per plastic top. Each unit of product requires six plastic tops. What is the
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- Quality Clothing, Inc., produces skorts and jumper uniforms for schoolchildren. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorges Scrap Warehouse for $3.25 per pound. Last year, the company sold 40,000 lb. of scrap, which would be enough to make 10,000 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.85. Fixed costs would increase by $95,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,000 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Should Quality continue to sell the scrap cloth or should Quality process the scrap into teddy bears to sell?arrow_forwardSantana Rey has found that Business Solutions’s line of computer desks and chairs has become popular, and she is finding it hard to keep up with demand. She knows that she cannot fill all of her orders for both items, so she decides she must determine the optimal sales mix given the resources she has available. Information about the desks and chairs follows. Santana has determined that she only has 1,015 direct labor hours available for the next quarter and wants to optimize her contribution margin given the limited number of direct labor hours available.arrow_forwardCans plc is developing a new form of 'crinkly can' for soft drinks. The crinkly can has grooves in the side which match the size of the fingers of a hand. The company's research and development department employs 50 people full-time and accounts for 2 per cent of the company's costs. The design manager thinks that it may be important in future to develop special designs for particular commercial customers, even if this involves relatively small production runs and a higher price to the customer for each can. He said 'Our profit margins are not yet satisfactory. I would like to maintain our existing level of sales of the standard can at the standard price, but also take advantage of our design skills and sell additional cans of the new style cans in smaller batches but at a higher price.' REQUIRED Explain the further information you would need in order to report on the benefits and problems for creating higher contribution margins and higher profit margins on the basis of the design…arrow_forward
- Konica Minolta plans to sell a copier that prints documents on both sides simultaneously, cutting in half the time it takes to complete big commercial jobs. The faster copier is expected to increase profit by $2,500,000 per year, regardless of which of the following rollers the company uses in its copiers. The estimated costs associated with chemically treated vinyl rollers and fiber-impregnated rubber rollers are shown below. Determine which of the roller types should be selected on the basis of an ROR analysis assuming the company’s MARR is 25% per year. Roller Type Treated Impregnated First cost, $1000 −5000 −6500 Annual cost, $1000/year −1000 −650 Salvage value, $1000 100 200 Life, years 5 5arrow_forwardAlderon Enterprises is evaluating a special order it has received for a ceramic fixture to be used in aircraft engines. Alderon has recently been operating at less than full capacity, so the firm's management will accept the order if the price offered exceeds the costs that will be incurred in producing it. You have been asked for advice on how to determine the cost of two raw materials that would be required to produce the order. A) The special order will require 800 gallons of Endor, a highly perishable material that is purchased as needed. Alderon currently has 1,200 gallons of Endor on hand, since the material is used in virtually all of the company's products. The last time endor was purchased, Alderon paid $5.00 per gallon. However, the average price paid for the endor in stock was only $4.75. The market price for the Endor is quite volatile, with the current price at $5.50. If the special order is accepted, Alderon will have to place a new order next week to replace the…arrow_forwardThe manager of the SkyHigh division of Superball Corp. is faced with a decision on whether or not to buy a new machine that will mix the ingredients used in the SkyHigh superball produced by the SkyHigh division. This ball bounces as high as a two-story building upon first bounce and is so popular that the SkyHigh division barely keeps up with demand. The manager is hoping the new machine will allow the balls to be produced more quickly and therefore increase the volume of production within the same time currently being used in production. The manager wants to evaluate the effect of the purchase of the machine on his compensation. He receives a base salary plus a 25% bonus of his salary if he meets certain income goals. The information he has available for the analysis is shown here: Cost of the machine 2,000,000 Income to be generated by the machine 1,000,000 Income without the new machine 7,000,000 Beginning capital asset (without machine) 8,000,000 Ending capital asset…arrow_forward
- The manager of the SkyHigh division of Superball Corp. is faced with a decision on whether or not to buy a new machine that will mix the ingredients used in the SkyHigh superball produced by the SkyHigh division. This ball bounces as high as a two-story building upon first bounce and is so popular that the SkyHigh division barely keeps up with demand. The manager is hoping the new machine will allow the balls to be produced more quickly and therefore increase the volume of production within the same time currently being used in production. The manager wants to evaluate the effect of the purchase of the machine on his compensation. He receives a base salary plus a 25% bonus of his salary if he meets certain income goals. The information he has available for the analysis is shown here: Cost of the machine 2,000,000 Income to be generated by the machine 1,000,000 Income without the new machine 7,000,000 Beginning capital asset (without machine) 8,000,000 Ending capital asset…arrow_forwardNorton Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. Norton currently manufactures 40,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Norton wants to set the bid at $7 per unit because she is sure that Norton will get the business at that price. Others on the executive committee of the firm object, saying that Norton would lose money on the special order at that price. Units 40,000Manufacturing CostsDirect Materials $ 90,000Direct Labor 100,000Factory Overhead 260,000*Total Manufacturing Cost $ 450,000Unit Cost…arrow_forwardBefore Coronado could give Langston's Landscape Company an answer, the company received a special order from Benson Building & Supply for 13,500 fireplaces. Benson is willing to pay $67 per fireplace but it wants a special design imbedded into the fireplace that increases cost of goods sold by $55,350. The special design also requires the purchase of a part that costs $5,500 and will have no future use for Coronado Company. Benson Building & Supply will pick up the fireplaces so no shipping costs are involved. Due to capacity limitations, Coronado cannot accept both special orders. Which order should be accepted? Document your decision by preparing an incremental analysis for Benson's order. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)arrow_forward
- McAfee Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,000 units of one of its most popular products. McAfee currently manufactures 40,000 units of this product in its Boston, Massachusets, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of McAfee wants to set the bid at $7 per unit because she is sure that McAfee will get the business at that price. Others on the executive committee of the firm object, saying that McAfee would lose money on the special order at that price. Table attached Required Should McAfee accept the invitation to bid? Explain What would be the impact on short- term operating income if the order is accepted at the price recommended by the sales manager? Suppose that McAfee’s distribution center at the warehouse is operating at full capacity and would need to add capacity (leasing additional warehouse) costing $6,000 for…arrow_forwardMary Jones and Jack Smart have joined forces to start M&J Food Products, a processor of packaged shredded lettuce for institutional use. Jack has years of food processing experience, and Mary has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed cost of $50,000 and a variable cost of $2.50 per bag. They expect to sell 75,000 bags of lettuce per month. They expect to sell the shredded lettuce for $3.25 per 5-pound bag. Jack and Mary has been contacted by a vendor to consider a more mechanized process. This new process will have monthly fixed cost of $125,000 per month with a variable cost of $1.75 per bag. Based on the above…arrow_forwardMary Jones and Jack Smart have joined forces to start M&J Food Products, a processor of packaged shredded lettuce for institutional use. Jack has years of food processing experience, and Mary has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed cost of $50,000 and a variable cost of $2.50 per bag. They expect to sell 75,000 bags of lettuce per month. They expect to sell the shredded lettuce for $3.25 per 5-pound bag. Jack and Mary has been contacted by a vendor to consider a more mechanized process. This new process will have monthly fixed cost of $125,000 per month with a variable cost of $1.75 per bag. Based on the above…arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College