s Secure| he signment T1 1 Week 11 Prootke 0 The company chronically has no idle

Question

s Secure| he signment T1 1 Week 11 Prootke 0 The company chronically has no idle capacity and the old Model 6100 machine is the company's constraint. Management s considering purchasing a Model 8300 machine to use in addtion to the company's presens Model 8100 machine. The old Model B100 machine will continue to be used to capacity before, with the new Medel n00 machine beng used to rxpand produein new increase the company's production and sales. The increase in volume will be large enough to require increases in fosed seling expenses and in general administrative overheed, but not in the fxed manufacturing overhead. Case B The old Model B100 machine is not the company's constraint, but management is considering replacing it with a new Model B300 machine because of the potential savings in dret materials with the new machine. The Model 8100 machine would be sold. This change will have no effect on production or sales, other than some savings in direct materials costs due to less waste. Required: Copy the information below onto your answer sheet and place an X in the appropriane column to indicate whether each tem s relevant or irrelevant to the decision context described in Case A and Case B 8100 machine machine Despocal vaue Modbe 100 machine h Market valu-Model B300 machine (cost) Variable seling expense ?Prey 30, 31# Next ere to search TOSHIBA 7 6 8 9 0

Explanation / Answer

Item Case1 Case2 a. Sales revenue Relevant Not Relevant b. Direct materials Relevant Relevant c. Direct labor Relevant Not Relevant d. Variable manufacturing overhead Relevant Not Relevant e. Book value—Model B100 machine Not Relevant Not Relevant f. Disposal value—Model B100 machine Not Relevant Relevant g. Depreciation—Model B100 machine Not Relevant Not Relevant h. Market value—Model B300 machine (cost) Relevant Relevant i. Fixed manufacturing overhead (general) Not Relevant Not Relevant j. Variable selling expense Relevant Not Relevant k. Fixed selling expense Relevant Not Relevant l. General administrative overhead Relevant Not Relevant

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