Exercise 7-2 (Part Level Submission) Gruden Company produces golf discs which it normally sells to..

Exercise 7-2 (Part Level Submission)
Gruden Company produces golf discs which it
normally sells to retailers for $6.81 each. The cost of manufacturing 21,000
golf discs is:

Materials

$10,290

Labor

32,550

Variable overhead

22,260

Fixed overhead

42,210

Total

$107,310

Gruden also incurs 6% sales commission ($0.41) on each disc sold.

McGee Corporation offers Gruden $5 per disc for 4,700 discs.
McGee would sell the discs under its own brand name in foreign markets not yet
served by Gruden. If Gruden accepts the offer, its fixed overhead will increase
from $42,210 to $47,136 due to the .wiley.com/edugen/shared/assignment/test/qreport.uni?id=quest2090119entrance1&partid=part1&assignment=asnmt1425521&student=usr3745626&class=cls446645&tqid=tq793249973&attempt=atmpt1300458649&poolid=&mode=”>purchase of a new imprinting machine. No
sales commission will result from the special order.

Exercise 7-2 (Part Level Submission)
Gruden Company produces golf discs which it
normally sells to retailers for $6.81 each. The cost of manufacturing 21,000
golf discs is:

Materials

$10,290

Labor

32,550

Variable overhead

22,260

Fixed overhead

42,210

Total

$107,310

Gruden also incurs 6% sales commission ($0.41) on each disc sold.

McGee Corporation offers Gruden $5 per disc for 4,700 discs.
McGee would sell the discs under its own brand name in foreign markets not yet
served by Gruden. If Gruden accepts the offer, its fixed overhead will increase
from $42,210 to $47,136 due to the purchase of a new imprinting machine. No
sales commission will result from the special order.

Exercise 7-5 (Part Level Submission)
Schopp Inc. has been
manufacturing its own shades for its table lamps. The company is currently
operating at 100% of capacity, and variable manufacturing overhead is charged
to production at the rate of 60% of direct labor cost. The direct materials and
direct labor cost per unit to make the lamp shades are $3.97 and $4.90,
respectively. Normal production is 32,000 table lamps per year.
A supplier offers to make the lamp shades at a price of
$13.30 per unit. If Schopp Inc. accepts the supplier’s offer, all variable
manufacturing costs will be eliminated, but the $41,470 of fixed manufacturing
overhead currently being charged to the lamp shades will have to be absorbed by
other products.

Exercise 7-5 (Part Level
Submission)
Schopp Inc. has been manufacturing its
own shades for its table lamps. The company is currently operating at 100% of
capacity, and variable manufacturing overhead is charged to production at the
rate of 60% of direct labor cost. The direct materials and direct labor cost
per unit to make the lamp shades are $3.97 and $4.90, respectively. Normal
production is 32,000 table lamps per year.
A supplier offers to make the lamp shades at a price of
$13.30 per unit. If Schopp Inc. accepts the supplier’s offer, all variable
manufacturing costs will be eliminated, but the $41,470 of fixed
manufacturing overhead currently being charged to the lamp shades will have
to be absorbed by other products.

(b)

(b)

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Your answer is correct.

Should Schopp Inc. buy
the lamp shades?

Exercise 7-5 (Part Level
Submission)
Schopp Inc. has been manufacturing its
own shades for its table lamps. The company is currently operating at 100% of
capacity, and variable manufacturing overhead is charged to production at the
rate of 60% of direct labor cost. The direct materials and direct labor cost
per unit to make the lamp shades are $3.97 and $4.90, respectively. Normal
production is 32,000 table lamps per year.
A supplier offers to make the lamp shades at a price of
$13.30 per unit. If Schopp Inc. accepts the supplier’s offer, all variable
manufacturing costs will be eliminated, but the $41,470 of fixed
manufacturing overhead currently being charged to the lamp shades will have
to be absorbed by other products.

(c)

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Your answer is correct.

Would your answer be different in (b) if
the produc

Exercise 7-9 (Part Level Submission)
Rachel Rey 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. Rachel has put
together a variety of raw material kits, each including materials at various
stages of completion. Unfortunately, owing to space limitations, Rachel 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 Rachel $18 and
sells for $31. 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. Rachel 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 $20 per hour. Because she is more efficient at cutting and dying
reeds than her average customer, Rachel 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.

Prepare an incremental
analysis for the Rachel’s basketweaving shop.(Enter negative amounts
using either a negative sign preceding the number e.g. -45 or parentheses e.g.
(45).)

Exercise 7-9 (Part Level
Submission)
Rachel Rey 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. Rachel has put
together a variety of raw material kits, each including materials at various
stages of completion. Unfortunately, owing to space limitations, Rachel 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 Rachel
$18 and sells for $31. 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. Rachel 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 $20 per hour. Because she is more efficient at
cutting and dying reeds than her average customer, Rachel 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.

(b)

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Your answer is correct.

Should Rachel’s carry the basic
introductory kit with undyed and uncut reeds or the Stage 2 kit with reeds
already dyed and cut?

Exercise 7-17 (Part Level
Submission)
Twyla
Company operates a small factory in which it manufactures two products: C
and D. Production and sales results for last year were as follows.

C

D

Units sold

9,100

19,670

Selling price per unit

$95

$76

Variable cost per unit

49

41

Fixed cost per unit

24

24

For purposes of simplicity, the firm averages total fixed costs over the
total number of units of C and D produced and sold.
The research department has developed a new product (E)
as a replacement for product D. Market studies show that Twyla Company could
sell 11,550 units of E next year at a price of $115; the variable cost per
unit of E is $44. The introduction of product E will lead to a 11% increase
in demand for product C and discontinuation of product D. If the company
does not introduce the new product, it expects next year’s results to be
the same as last year’s.

(a)

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Your answer is incorrect.

Compute company profit with
products C & D and with products C & E.

Exercise 7-17 (Part Level
Submission)
Twyla
Company operates a small factory in which it manufactures two products: C
and D. Production and sales results for last year were as follows.

C

D

Units sold

9,100

19,670

Selling price per unit

$95

$76

Variable cost per unit

49

41

Fixed cost per unit

24

24

For purposes of simplicity, the firm averages total fixed costs over the
total number of units of C and D produced and sold.
The research department has developed a new product (E)
as a replacement for product D. Market studies show that Twyla Company
could sell 11,550 units of E next year at a price of $115; the variable
cost per unit of E is $44. The introduction of product E will lead to a 11%
increase in demand for product C and discontinuation of product D. If the
company does not introduce the new product, it expects next year’s results
to be the same as last year’s.

(b)

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Your answer is correct.

Should Twyla Company
introduce product E next year?

Problem 7-1A (Part Level
Submission)
ShurShot Sports Inc. manufactures basketballs for
the National Basketball Association (NBA). For the first 6 months of 2014,
the company reported the following operating results while operating at 80%
of plant capacity and producing 119,600 units.

Amount

Sales

$4,664,400

Cost of goods sold

3,723,756

Selling and administrative expenses

497,536

Net income

$443,108

Fixed costs for the period were cost of goods sold $1,079,400, and selling
and administrative expenses $248,768.

In July, normally a slack manufacturing month, ShurShot
Sports receives a special order for 10,300 basketballs at $29 each from the
Greek Basketball Association (GBA). Acceptance of the order would increase
variable selling and administrative expenses $0.48 per unit because of
shipping costs but would not increase fixed costs and expenses.

roblem 7-1A (Part Level
Submission)
ShurShot
Sports Inc. manufactures basketballs for the National Basketball
Association (NBA). For the first 6 months of 2014, the company reported the
following operating results while operating at 80% of plant capacity and
producing 119,600 units.

Amount

Sales

$4,664,400

Cost of goods sold

3,723,756

Selling and
administrative expenses

497,536

Net income

$443,108

Fixed costs for the period were cost of goods sold $1,079,400, and selling
and administrative expenses $248,768.

In July, normally a slack manufacturing month, ShurShot
Sports receives a special order for 10,300 basketballs at $29 each from the
Greek Basketball Association (GBA). Acceptance of the order would increase
variable selling and administrative expenses $0.48 per unit because of
shipping costs but would not increase fixed costs and expenses.

(b)

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Your answer is correct.

Should ShurShot Sports Inc.
accept the special order?

Problem 7-1A (Part Level
Submission)
ShurShot
Sports Inc. manufactures basketballs for the National Basketball
Association (NBA). For the first 6 months of 2014, the company reported the
following operating results while operating at 80% of plant capacity and
producing 119,600 units.

Amount

Sales

$4,664,400

Cost of goods sold

3,723,756

Selling and
administrative expenses

497,536

Net income

$443,108

Fixed costs for the period were cost of goods sold $1,079,400, and selling
and administrative expenses $248,768.

In July, normally a slack manufacturing month, ShurShot
Sports receives a special order for 10,300 basketballs at $29 each from the
Greek Basketball Association (GBA). Acceptance of the order would increase
variable selling and administrative expenses $0.48 per unit because of
shipping costs but would not increase fixed costs and expenses.

(c)

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Your answer is correct.

What is the minimum selling
price on the special order to produce net income of $4.08 per ball?(Round answer to 2 decimal places, e.g. 15.25.)

Problem 7-4A (Part Level
Submission)
Last
year (2013), Richter Condos installed a mechanized elevator for its
tenants. The owner of the company, Ron Richter, recently returned from an
industry equipment exhibition where he watched a computerized elevator
demonstrated. He was impressed with the elevator’s speed, comfort of ride,
and cost efficiency. Upon returning from the exhibition, he asked his
purchasing agent to collect price and operating cost data on the new
elevator. In addition, he asked the company’s accountant to provide him
with cost data on the company’s elevator. This information is presented
below.

Old Elevator

New Elevator

Purchase price

$102,500

$159,787

Estimated salvage value

0

0

Estimated useful life

5 years

4 years

Depreciation method

Straight-line

Straight-line

Annual operating costs

other than
depreciation:

Variable

$35,953

$9,213

Fixed

23,540

8,667

Annual revenues are $239,062, and selling and
administrative expenses are $29,457, regardless of which elevator is used.
If the old elevator is replaced now, at the beginning of 2014, Richter
Condos will be able to sell it for $25,608.

(a)

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.png” alt=”Partially correct answer.”>

Your answer is partially
correct.

Determine any gain or loss
if the old elevator is replaced.

Problem 7-4A (Part Level
Submission)
Last
year (2013), Richter Condos installed a mechanized elevator for its
tenants. The owner of the company, Ron Richter, recently returned from an
industry equipment exhibition where he watched a computerized elevator
demonstrated. He was impressed with the elevator’s speed, comfort of ride,
and cost efficiency. Upon returning from the exhibition, he asked his
purchasing agent to collect price and operating cost data on the new
elevator. In addition, he asked the company’s accountant to provide him
with cost data on the company’s elevator. This information is presented
below.

Old Elevator

New Elevator

Purchase price

$102,500

$159,787

Estimated salvage value

0

0

Estimated useful life

5 years

4 years

Depreciation method

Straight-line

Straight-line

Annual operating costs

other than
depreciation:

Variable

$35,953

$9,213

Fixed

23,540

8,667

Annual revenues are $239,062, and selling and
administrative expenses are $29,457, regardless of which elevator is used.
If the old elevator is replaced now, at the beginning of 2014, Richter
Condos will be able to sell it for $25,608.

(b)

Problem 7-4A (Part Level
Submission)
Last year (2013), Richter Condos installed a
mechanized elevator for its tenants. The owner of the company, Ron Richter,
recently returned from an industry equipment exhibition where he watched a
computerized elevator demonstrated. He was impressed with the elevator’s
speed, comfort of ride, and cost efficiency. Upon returning from the
exhibition, he asked his purchasing agent to collect price and operating cost
data on the new elevator. In addition, he asked the company’s accountant to
provide him with cost data on the company’s elevator. This information is
presented below.

Old Elevator

New Elevator

Purchase price

$102,500

$159,787

Estimated salvage value

0

0

Estimated useful life

5 years

4 years

Depreciation method

Straight-line

Straight-line

Annual operating costs

other than depreciation:

Variable

$35,953

$9,213

Fixed

23,540

8,667

Annual revenues are $239,062, and selling and
administrative expenses are $29,457, regardless of which elevator is used. If
the old elevator is replaced now, at the beginning of 2014, Richter Condos
will be able to sell it for $25,608.