11 Comprehensive problem including special order, outsourcing, and segment elimi
ID: 2424721 • Letter: 1
Question
11 Comprehensive problem including special order, outsourcing, and segment elimination decisions LO 13-2, 13-3, 13-4
Lang Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company’s chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment’s operating activities. The relevant range for the production and sale of the calculators is between 34,000 and 74,000 units per year.
(Consider each of the requirements independently.)
a-1
.
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
INDIRECT MATERIALS:
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
INDIRECT MATERIALS:
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
INDIRECT MATERIALS:
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
A large discount store has approached the owner of Lang about buying 7,000 calculators. It would replace The Math Machine’s label with its own logo to avoid affecting Lang’s existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. (Negative amount should be indicated by a minus sign.)
CONTRIBUTION MARGIN(OR LOSS) ( )
Lang has an opportunity to buy the 47,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Lang’s quality standards. Lang could continue to use its own logo, advertising program, and sales force to distribute the products. Should Lang buy the calculators or continue to make them?
Calculate the total cost for Lang to make and buy the 47,000 calculators.
MAKE BUY
TOTAL COST ( ) ( )
Should Lang buy the calculators or continue to make them, if the volume of sales were increased to 74,000 units?
Calculate the contribution to profit from operating the calculator division. (Negative amount should be indicated by a minus sign.) CONTRIBUTION TO PROFIT (LOSS) ( )
Allocating costs among products 12 LO 12-3
Longman Construction Company expects to build three new homes during a specific accounting period.
The estimated direct materials and labor costs are as follows.
Assume Longman needs to allocate two major overhead costs ($38,610 of employee fringe benefits and $29,820 of indirect materials costs) among the three jobs.
Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. (Round "Allocation rate" to 3 decimal places.)
FRINGE BENEFITS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ______________ x _______________ = ________________
2 ______________ x _______________ = _______________
3 ______________ x _______________ = ________________
INDIRECT MATERIALS:
HOUSE ALLOCATION RATE x WEIGHT OF BASE = ALLOCATED COST
1 ________________ x _______________ = ______________
2 ________________ x _______________ = ______________
3 ________________ x _______________ = ______________
THE COST OF THE COMPONENTS TO DETERMINE THE TOTAL COST OF EACH HOUSE:
EXPECTED COSTS HOME 1 HOME 2 HOME 3 TOTAL
DIRECT LABOR ________ __________ _________ ____________
DIRECT MATERIALS _______ ___________ __________ ____________
FRINGE BENEFITS ________ ___________ ___________ ____________
INDIRECT MATERIALS ________ ___________ ___________ ____________
TOTAL COST _________ ___________ ___________ _____________
Lang Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company’s chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment’s operating activities. The relevant range for the production and sale of the calculators is between 34,000 and 74,000 units per year.
Explanation / Answer
a-1) Contribution margin 7000 *.25 = $1,750
(Contribution per unit = $5.80 - ( variable cost 3 +2 +.30 +.25) = $.25 per unit
b) Purchase cost 47,000 *6.50 = $305,500
Make cost 47,000 *7.55 = $354,850
c)Contribution from making 74,000 units = 74,000 *3.45 = $255,300
d)Alloaction
20,570
$38,610/ 351,000 = $.11 per direct labor cost
Indirect materials
$29,820/426,000 = $.07
Allocation rate weight of base Allocated rate 1 .11 70,000 7,700 2 .11 94,000 10,340 3 .11 187,00020,570
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