A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $235,000 Cost of goods sold 111,000 Gross profit $124,000 Operating expenses 143,000 $(19,000) Loss from operations It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Differential Effect Continue Royal Cola (Alternative 1) Cola (Alternative 2) Discontinue on Income (Alternative 2) $ Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) b. Should Star Cola be retained? Explain by $ if the product is discontinued As indicated by the differential analysis in part (A), the income would Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $601,000 and has $349,800 of accumulated depreciation to date, with a new machine that has a purchase price of $484,200. The old machine could be sold for $64,700. The annual variable production costs associated with the old machine are estimated to be $157,800 per year for eight years. The annual variable production costs for the new machine are estimated to be $102,400 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Differential Effect Replace Old Machine Continue with Old Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Variable productions costs (8 years) Income (Loss) Determine whether to continue with (Alternative 1) replace (Alternative 2) the old machine. b. What is the sunk cost in this situation? The sunk cost is $ Sell or Process Further Jackson Lumber Company incurs a cost of $382 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $562 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $527 per hbf, which can be sold for $756 per hbf. Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2) August 9 Differential Effect Process Further into Finished Cut (Alternative 1) (Alternative 2) (Alternative 2) Sell Rough-Cut on Income Revenues, per 100 board ft. Costs, per 100 board ft. Income (Loss), per 100 board ft. $ Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2) Abica Coffee Company produces Columbian coffee in batches of 6,800 pounds. The standard quantity of materials required in the process is 6,800 pounds, which cost $5 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $14,576 per batch. The additional processing also causes a 5% loss of product due to evaporation. a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) October 6 Process Sell Regular Columbian Differential Effect Further into Decaf Columbian on Income (Alternative 2) (Alternative 1) (Alternative 2) Revenues Costs Income (Loss) b. Should Abica sell Columbian coffee or process further and sell Decaf Columbian? c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. Round your answer to two decimal places. per pound Country Jeans Co. has an annual plant capacity of 65,200 units, and current production is 46,500 units. Monthly fixed costs are $40,500, and variable costs are $25 per unit. The present selling price is $34 per unit. On November 12 of the current year, the company received an offer from Miller Company for 16,100 units of the product at $27 each. Miller Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Country Jeans Co. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 Differential Accept Order (Alternative 1) (Alternative 2) (Alternative 2) Reject Order Effect on Income Revenues Costs: Variable manufacturing costs Income (Loss) than the differential cost. Thus, b. Having unused capacity available is to this decision. The differential revenue is accepting this additional business will result in a net c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. Product Cost Concept of Product Pricing La Femme Accessories Inc. produces women's handbags. The cost of producing 1,170 handbags is as follows: Direct materials $15,200 7,900 Direct labor 6,200 Factory overhead $29,300 Total manufacturing cost The selling and administrative expenses are $27,900. The management wants a profit equal to 18% of invested assets of $505,000. If required, round your answers to nearest whole number. a. Determine the amount of desired profit from the production and sale of 1,170 handbags. If required, round your answers to nearest whole number. $ b. Determine the product cost per unit for the production of 1,170 handbags. per unit c. Determine the product cost markup percentage for handbags. d. Determine the selling price of handbags. Round your answers to nearest whole value. $ Cost per unit Markup per unit Selling price per unit