a.Yasmin Co. can further process Product B to produce Product C. Product B is cu

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a.Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $32 per pound and costs $28 per pound to produce. Product C would sell for $59 per pound and would require an additional cost of $25 per pound to produce. What is the differential cost of producing Product C?

b.Jacoby Company received an offer from an exporter for 29,100 units of product at $19 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $23 Unit manufacturing costs: Variable $14 Fixed $5 What is the differential revenue from the acceptance of the offer?

c.Stryker Industries received an offer from an exporter for 25,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $22 Unit manufacturing costs: Variable 12 Fixed 3 What is the amount of income or loss from the acceptance of the offer?

d.Starling Co. is considering disposing of a machine with a book value of $21,000 and estimated remaining life of five years. The old machine can be sold for $5,300. A new high-speed machine can be purchased at a cost of $71,600. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $22,800 to $19,000 if the new machine is purchased. The differential effect on income for the new machine for the entire five years is a(n)

e.Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $64 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $32 per unit; direct labor, $9 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $89,000. Which option should be selected and why?

f.Keating Co. is considering disposing of equipment with a cost of $72,000 and accumulated depreciation of $50,400. Keating Co. can sell the equipment through a broker for $27,000, less a 6% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $50,000. Keating will incur repair, insurance, and property tax expenses estimated at $11,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is

g.Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $8.55 per pound to produce. What is the differential revenue of producing Product D?

h.Falcon Co. produces a single product. Its normal selling price is $30 per unit. The variable costs are $19 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $1 per unit would be eliminated. Should the special order be accepted?

i.Falcon Co. produces a single product. Its normal selling price is $30 per unit. The variable costs are $19 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $1 per unit would be eliminated. If the order is accepted, what would be the impact on net income?

j.Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activities—production setup, materials handling, and general factory activities. Miramar uses activity-based costing to allocate overhead to products. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities: Activity Cost Activity Base Production setup $250,000 Number of setups Material handling 150,000 Number of parts General overhead 80,000 Number of direct labor hours Each product's total activity in each of the three areas are as follows: Product A Product B Number of setups 100 300 Number of parts 40,000 20,000 Number of direct labor hours 8,000 12,000 What is the activity rate for materials handling?

k.Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $23.15 per pound and costs $16.40 per pound to produce. Product D would sell for $36.35 per pound and would require an additional cost of $9.85 per pound to produce. What is the differential cost of producing Product D?

Explanation / Answer

a Product B Sale $32 per pound Cost 28 per pound Product C Sale 59 per pound Cost 25 per pound Differential Cost Cost (B+C)- Cost B (28+25)-28 25 b Sale Price(29100*19) 552900 Less : Variable cost (29100*14) -407400 Differential Revenue 145500 c Sale Price (25000*16) 400000 Less : Variable cost(25000*12) -300000 Income from acceptance of offer 100000

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