Do It! Review 20-2 (Part Level Submission) (a) Do It! Review 20-3 Mesa Verde man
ID: 2417369 • Letter: D
Question
Do It! Review 20-2 (Part Level Submission)
(a)
Do It! Review 20-3
Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $66. Production costs are $36 variable and $11 fixed. Mesa Verde is considering staining and sealing the table to sell it for $107. Variable costs to finish each table are expected to be $15, and fixed costs are expected to be $2.
Prepare an incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Determine whether Mesa Verde should sell tables or process further tables.
Do It! Review 20-4
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $495,060, variable expenses of $374,260, and fixed expenses of $140,320. Therefore, the gloves and mittens line had a net loss of $19,520. If Gator eliminates the line, $44,740 of fixed costs will remain.
Prepare an incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Determine whether the company should eliminate the gloves and mittens line?
Brief Exercise 20-7
Kobe Company has a factory machine with a book value of $92,180 and a remaining useful life of 4 years. It can be sold for $34,430. A new machine is available at a cost of $254,440. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $740,970 to $628,060.
Prepare an incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Determine whether the old machine should be retained or replaced.
Complete the following sentences.
Zeller Company estimates that 2014 unit sales will be 18,100 in quarter 1, 23,300 in quarter 2, and 29,400 in quarter 3, at a unit selling price of $24. Management desires to have ending finished goods inventory equal to 23% of the next quarter’s expected unit sales.
Prepare a production budget by quarter for the first 6 months of 2014.
ZELLER COMPANY
Production Budget
For the Six Months Ending June 30, 2014
Quarter
1
2
Six Months
Open Show Work
Do It! Review 21-3
Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.
Sales: Sales for the year are expected to total 1,400,000 units. Quarterly sales are 20%, 25%, 27%, and 28%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $43 per unit beginning in the fourth quarter. Sales in the first quarter of 2015 are expected to be 15% higher than the budgeted sales for the first quarter of 2014.
Production: Management desires to maintain the ending finished goods inventories at 20% of the next quarter’s budgeted sales volume.
Direct materials: Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2015 are 508,000 pounds.
Prepare the sales, production, and direct materials budgets by quarters for 2014. (Round answers to 0 decimal places, e.g. 5,275.)
ASH CREEK COMPANY
Sales Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Expected unit sales
Unit selling price
Total sales
ASH CREEK COMPANY
Production Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
ASH CREEK COMPANY
Direct Materials Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Do It! Review 20-2 (Part Level Submission)
Rubble Company must decide whether to make or buy some of its components. The costs of producing 63,900 switches for its generators are as follows.Direct materials $30,410 Variable overhead $44,560 Direct labor $37,972 Fixed overhead $77,480
Instead of making the switches at an average cost of $2.98 ($190,422 ÷ 63,900), the company has an opportunity to buy the switches at $2.73 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
Explanation / Answer
a) Incremental analysis
Make Buy Net income increase / (Decrease)
Direct material 30410 0 30410
Direct Labour 37972 0 37972
Variable overhead 44560 0 44560
Fixed Overhead 77480 58110 19370
Purcashe price(63900 unit*$2.73) 0 174447 (174447)
Total cost 190422 232557 (42135)
Therefore, the company should make the product , because by buying the product ,it will incur extra cost of $42135
Note:- Fixed overhead in Buy = $77480 * 1/4 (eliminated)
= 19370
that means ,$58110 (77480 - 19370) is still incurred
20-3
Sell Process Further Net income / (Decrease)
Sales 66 107 41
Cost per unit
Variable 36 15 21
Fixed 11 2 9
Total 47 17 30
Net income 19 90 71
The company should process further the unit , becasue it will give additional income o f$71 (By reducing total cost and increaseing selling price per unit)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.