47&48

44. Fixed selling expense Figure 11-11. (5 points) Goutam Company prints a variety of publications and colored inserts for newspapers. Currently, Goutam produces its own ink, including a special metallic color. India Inks has offered to supply Goutam with the 25,000 ounces of metallic ink that it needs each year for S1.24 per ounce. Goutam is interested because this is a particularly diflicult ink to make. Purchasing must make special efforts to locate suppliers, the metallic component requires special handling, and, since the metallic ink uses machinery that is also used to make other colors of ink, the machinery must be cleaned very well before every batch of metallic. The accounting department supplied the following unit costs: Direct materials Direct labor Variable overhead Fixed overhead S0.40 0.15 0.06 0.50 Fixed overhead is applied on the basis of a plantwide rate based on direct labor hours. 7. Refer to Figure 11-11. A. Based on the cost figures, if Goutam purchases metallic ink from the outside supplier, operating income will be 15,750 lower Higher or Lower? B. What is the highest price per ounce that Goutam, would pay an outside supplier for the ink? $.61 (5 points) Sherpa Company manufactures tents and sleeping bags. Tents are priced at $80, have variable cost of $55, and direct fixed costs of $120,000. Sleeping bags are priced at $60, have variable cost of $35, and direct fixed costs of S66,000. Common fixed costs equal $200,000. Last year, the division sold 5,000 tents and 10,000 sleeping bags. 48. A. What was the segment margin for tents last year? $5000 B. What was the segment margin for sleeping bags last year? $184,000 C. What was Sherpa's operating income last year? ($11,000) D. If Sherpa stopped making tents, what would operating income be? ($16,000)