Question 1 Russell Company uses Beltran Company and Southern Express Inc. to buy

Question

Question 1

Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1,200,000 chips needed per year. In order to determine which supplier is the most cost effective Russell Co. compiled the following data:

Required:

If required, round your answers to the nearest cent. When required, use rounded amounts in subsequent computations.

A. Calculate the activity rate for each activity.

B. Calculate the cost per chip for each supplier.

C. Which supplier should Russell Company choose?

Question 2

A sales commission of 2% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $32,000 for the leather jackets and $66,000 for the suede jackets. Common fixed overhead for the factory was estimated to be $83,000 and common selling and administrative expense was estimated to be $14,000.

Required:

Prepare a segmented income statement for Mario Co. for the coming year, using variable costing. Enter all amounts as positive numbers.

Activity Activity Cost Testing $800,000 Warranty work $3,600,000

Explanation / Answer

A.

B.

C.

Russell Co. should choose Southern Express to be their supplier because it is costing them less perchip.

Question 2

Testing $800,000/1,750 = 457.14 Warrenty $3,600,000 / 6,400 = $562.50

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