Category: Composition examples,
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Part 9: E9-6, E9-11, P9-1A, P9-5A E9-6 SY Telc has recently started out the production of RecRobo, a three-wheeled robot that could scan a home for fire and gas leaks then transmit this info to a cellphone. The cost framework to produce 20, 000 RecRobo’s is just as follows. | Cost| Direct components ($40 every robot)| $800, 000| Direct labor ($30 per robot)| 600, 000| Variable over head ($6 every robot)| 120, 000| Allotted fixed over head ($25 every robot)| 500, 000 | Total| $2, 020, 000 | SY Telc can be approached by Chen Incorporation.

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which offers to create RecRobo for $90 per unit or perhaps $1, 800, 000. Instructions (a) Using incremental evaluation, determine if SY Telc should acknowledge this present under each of the following 3rd party assumptions. * (1) Assume that $300, 1000 of the set overhead cost can be reduced (avoided). 2. (2) Imagine none of them with the fixed overhead can be decreased (avoided). Yet , if the programs are purchased by Chen Inc., SY Telc can use the released successful resources to create additional salary of $300, 000. * (b) Explain the qualitative factors that might affect the decision to purchase the robots by an outside distributor. E9-11 Twyla Enterprises utilizes a computer to deal with its product sales invoices.

Recently, business has become so good which it takes an extra 3 several hours per night, in addition every third Saturday, to keep up with the volume of revenue invoices. Supervision is taking into consideration updating its computer having a faster unit that would get rid of all of the overtime processing. | Current Machine | New Machine | Original order cost| $15, 000| $25, 000| Accrued depreciation| $6, 000| “| Estimated total annual operating costs| $24, 000| $18, 000| Useful life| 5 years| 5 years| If distributed now, the current machine would have a salvage value of $5, 000. If operated for the remainder of the useful your life, the current equipment would have actually zero salvage worth.

The new machine is likely to have zero salvage benefit after five years. Instructions Should the current machine get replaced? P9-1A Pro Sports Inc. manufactures basketballs for the National Field hockey Association (NBA). For the first 6 months of 08, the company reported the following functioning results when operating at 90% of plant capability and creating 112, 500 units. | Amount| Sales| $4, 500, 000| Cost of items sold| 3, 600, 000| Selling and administrative expenses| 450, 500 | Net income| $450, 000 | Fixed costs for the period were: cost of goods distributed $1, 080, 000, and selling and administrative expenditures $225, 500.

In September, normally a slack developing month, Expert Sports obtains a special buy for 15, 000 basketballs at $28 each from the Italian Basketball Association (IBA). Acceptance from the order might increase varying selling and administrative expenses $0. 50 per product because of delivery costs although would not enhance fixed costs and bills. Instructions * (a) Prepare an gradual analysis to get the exceptional order. * (b) Should Pro Sports Inc. acknowledge the special order? Describe your solution. * (c) What is the minimum value on the special order to generate net income of $4. 12 per ball? (d) What nonfinancial factors should supervision consider in making its decision? P9-5A Lewis Manufacturing Organization has four operating divisions. During the initial quarter of 2008, the corporation reported mixture income coming from operations of $176, 1000 and the pursuing divisional benefits. | Division| | I| II| III| IV| Sales| $250, 000| $200, 000| $500, 000| $400, 000| Cost of goods sold| 200, 000| 189, 000| 300, 000| 250, 000| Advertising and management expenses| 65, 000 | 60, 1000 | 60, 000 | 50, 500 | Cash flow (loss) via operations| $(15, 000) | $(49, 000) | $140, 000 | $100, 1000 |

Examination reveals the following percentages of variable costs in each division. | I| II| III| IV| Cost of goods sold| 70%| 90%| 80%| 75%| Offering and administrative expenses| 40| 70| 50| 60| Discontinuance of any kind of division would save 50 percent of the fixed costs and expenses for this division. Best management is extremely concerned about the unprofitable sections (I and II). Opinion is that much more both of the divisions should be discontinued. Guidance * (a) Compute the contribution perimeter for Sections I and II. (a) I $84, 000 (b) Prepare an incremental examination concerning the conceivable discontinuance of (1) Department I and (2) Division II. What course of action will you recommend for each division? * (c) Prepare a columnar condensed income assertion for Lewis Manufacturing, if, perhaps Division 2 is taken away. Use the CVP format. Section II’s bound to happen fixed costs are allotted equally for the continuing sections. (c) Salary III $133, 850 5. (d) Reconcile the total income from functions ($176, 000) with the total income coming from operations with out Division II.

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