3 Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: 10 points Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Department Total Hardware Linens $ 4,270,000 $ 3,080,000 $ 1,190,000 1,357,000 942,000 415,000 2,913,000 2,138,000 775,000 2,310,000 1,430,000 880,000 $ 603,000 $ 708,000 $ (105,000) eBook Print A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 15% decrease in the sales of the Hardware Department. References Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) 4 Imperial Jewelers manufactures and sells a gold bracelet for $401.00. The company's accounting system says that the unit product cost for this bracelet is $269.00 as shown below: 12 points Direct materials Direct labor Manufacturing overhead Unit product cost $144 89 36 $269 eBook The members of a wedding party have approached Imperial Jewelers about buying 21 of these gold bracelets for the discounted price of $361.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $464 and that would increase the direct materials cost per bracelet by $7. The special tool would have no other use once the special order is completed. Hint Print To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $8.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. References Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the financial advantage (disadvantage) of accepting the special order from the wedding party? Financial advantage 2 Fraser Company will need a new warehouse in five years. The warehouse will cost $500,000 to build. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. 3 points Required: What lump-sum amount should the company invest now to have the $500,000 available at the end of the five-year period? Assume that the company can invest money at: (Round your final answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. Present Value 1. $ Ten percent Fourteen percent 35,100 X 35,100 X 2. $ 7 The management of Ballard Micro Brew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $26,000. The new machine would have a useful life of 10 years with no salvage value. 5 points Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.) Answer is not complete. 1. Depreciation expense 2. 3 Incremental net operating income Initial estment Simple rate of return 4. 6.4 %