Can you please show the formulas so I can try to understand how the solutions are found. Thank you!
Situation 2 Current Designs is always working to identify ways to increase efficiency while becoming more environmentally 7 conscious. During a recent brainstorming session, one employee suggested to Diane Buswell, controller, that the 8 company should consider replacing the current rotomold oven as a way to realize savings from reduced energy 9 consumption. The oven operates on natural gas, using 25,500 therms of natural gas for an entire year. A new 40 energy-efficient rotomold oven would operate on 22,500 therms of natural gas for an entire year. After seeking out 41 price quotes from a few suppliers, Diane determined that it would cost approximately $375,000 to purchase a new, 42 energy-efficient rotomold oven. She determines that the expected useful life of the new oven would be 10 years, and 43 it would have no salvage value at the end of its useful life. Current Designs would be able to sell the current oven for 44 $15,000 45 46 Instructions 47 (a) Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, 48 assuming that the average price for natural gas over the next 10 years will be $0.65 per therm. 49 (b) Diane is concerned that natural gas prices might increase at a faster rate over the next 10 years. If the company 50 projects that the average natural gas price of the next 10 years could be as high as $0.85 per therm, discuss 51 how that might change your conclusion in (a). (b) Would your answer in (a) change if the productive capacity released by not making the seats could be used to roduce income of $20,000 Net Income Increase (Decrease) Make Buy Total annual cost Opportunity cost Total cost Based solely on financial considerations, Current Designs should (indicate by placing an "X" in the appropriate cell below) Make Response: Situation 3 (a) Prepare an incremental analysis showi ng whether Current Designs should make or buy the "Revolution Seating System." Net Income Make Buy Increase (Decrease) Direct materials Direct labor Variable mfg, costs Fixed mfg. costs Purchase price Total annual cost 80 81 82 83 Based solely on financal considerations, Current Desisns hould (indicate bv placing an " in the appropriate cel belowi an "X" in the a Make Response: 186 188 18 19 191 19 193 (b) Would your answer in (a) change if the productive capacity released by not making the seats could he (b) Diane is concened that natural gas prices might increase at a faster rate over the next 10 years. If the company projects that the average natural gas price of the next 10 years could be as high as $0.85 per therm, discuss how that might change your conclusion in (a). Net Income Increase (Decrease) Retain Oven Replace Oven Variable mfg. costs New oven costs Proceed from scrapping old oven 4 Total Based solely on financial considerations, Current Designs should (indicate by placing an "X in the appropriate cell below] 56 57 58 59 RetainReplace Response: 160 161 162 16 166 167 168 Situation 3 169 (a) Prepare an incremental analysis showing whether Current Desiens should make or buy the "Revolution Seating 17 System." Situation 2 (a) Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold overn, assuming that the average price for natural gas over the next 10 years will be $0.65 per therm. Replace Overn Net Income Increase (Decrease) Retain Oven Variable mfg. costs New oven costs Proceed from scrapping old oven Total 31 32 133 Based solely on financial considerations, Current Designs should (indicate by placing an "X" in the appropriate cell below) Retain Replace 13 Response: 138 141 Diane is concerned that natural gas prices might increase at a faster rate over the next 10 years. If the company projects that the average natural gas price of the next 10 years could be as high as S0.85 per therm, discuss 145 (b) Situation 1 (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers. Net Income Increase (Decrease) Reject Order Accept Order 3 Revenues 34 Costs: Direct materials Direct labor Variable overhead Fixed overhead 85 86 87 89Cost to modify existing mold? 90 91 92 Total costs Net income 3 Based solely on financial considerations, Current Designs should (indicate by placing an "X in the appropriate cell below) 94 95 96 97 RejectAccept Response Situation 3 One of Current Designs' competitive advantages is found in the ingenuity of its owners and CEO, Mike Cichanowski. His 5 involvement in the design of kayak molds and production techniques has led to Current Designs being recognized as an 6 industry leader in the design and production of kayaks. This ingenuity was evident in an improved design of one of the 57 most important component of a kayak, the seat. The "Revolution Seating System" is one-of-a-kind, rotating axis seat 58 that gives unmatched, full contact, under-leg support. It is quickly adjustable with a lever-lock system that allows for a 59 customizable seat position that maximizes comfort for the rider. 60 Having just designed the "Revolution Seating System", Current Designs must now decide whether to produce the seats 61 internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows. 62 63 64 65 66 Current Designs will need to produce 4,500 seats this year; 25% of the fixed overhead will be avoided if the seats are Direct materials Variable overhead $30/unit $22.5/unit Direct labor Fixed overhead $18/unit $30,000 purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will 67 68 cost $75 to purchase a seat from an outside vendor 69 70 Instructions 71 (a) Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." 72 73 (b) Would your answer in (a) change if the productive capacity released by not making the seats could be used to 74 75 NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a"?". produce income of $30,000? Situation 1 Recently, Mike Cichanowski, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to inquire about the possibility of Current Designs producing "floating coolers" for a promotion his company was planning. These coolers resemble a kayak but are about one-third 7 the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip 8 The company would be interested in purchasing 150 coolers for the upcoming summer. It is willing to pay $375 9 per cooler. The brewing company would pick up the coolers upon completion of the order. 20 Mike met with Diane Buswell, controller, to identify how much it would cost Current Designs to produce 21 the coolers. After careful analysis, the following costs were identified. 23 24 25 Direct materials Direct labor $120/unit $90/unit Variable overhead Fixed overhead $30/unit $1,500 26 Current Designs would be able to modify an existing mold to produce the coolers. The cost of these 27 modifications would be approximately $3,000. 28 29 Instructions 30 (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to 31 32 (b) Discuss additonal factors that Mike and Diane should consider if Current Designs is currently operating at produce the coolers. full capacity. 34
