Ch. 23 Question 2

Question 5

Question 8:

my Gelb Company currently manufactures 47,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $85,000 per year, and allocated fixed costs are $62,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 47,000 units and buying 47,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of making 47,000 units. (Round "variable cost per unit" answer Incremental Costs to Make Relevant Amount per Unit $ 6.25 Relevant Fixed Costs Total Relevant Costs $ 293,750 Variable cost per unit Fixed manufacturing costs Total incremental cost to make $ 85,000 $ 293,750 Costs to Make Costs to Buy > Gelb Company currently manufactures 47,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $85,000 per year, and allocated fixed costs are $62,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 47,000 units and buying 47,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of buying 47,000 units. (Round "purchase price per unit" answe Incremental Costs to Buy Relevant Relevant Amount per Unit Fixed Costs Purchase price per unit $ 3.50 Total incremental cost to buy Total Relevant Costs $ $ 164,500 164,500 Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment. $3,700,000 MARINETTE COMPANY Income Statement-Canoe Segment Sales Variable costs Direct materials $ 790,000 Direct labor 840,000 Variable overhead 640,000 Variable selling and administrative 370,000 Total variable costs Contribution margin Fixed costs Direct 715,000 Indirect 640,000 Total fixed costs Net income 2,640,000 1,060,000 1,355,000 $ (295,000) 1. If canoes are discontinued, calculate the net income lost or gained. 2. Should management discontinue the manufacturing of canoes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 If canoes are discontinued, calculate the net income lost or gained. (Leave no cells blank. Enter zeros when Keep the department $ 3,700,000 Eliminate the department Sales Complete this question by entering your answers in the tabs below. Required 1 Required 2 If canoes are discontinued, calculate the net income lost or gained. (Leave no cells blank. Enter zeros when Keep the department $ 3,700,000 Eliminate the department Sales Expenses: Direct materials Direct labor Variable overhead Variable selling and administrative costs Direct fixed costs Indirect fixed costs 790,000 840,000 640,000 370,000 715,000 640,000 Total expenses Net income (loss) 3,995,000 (295,000) $ 0 The canoe division should be: If the canoe division is eliminated, income will be: Kept lower by: $ 3,700,000 Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. $4,500,000 Sales (300,000 units) Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses Net income 600,000 1,200,000 300,000 450,000 771,000 3,321,000 $1,179,000 The company has an opportunity to sell 30,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 15% and (2) administrative expenses would increase by $129,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit. Should the company accept or reject the offer? Complete this question by entering your answers in the tabs below. Net Income Accept or Reject Calculate the combined total net income if the company accepts the offer to sell additional units at the redu per unit. Normal Volume Additional Volume $ 4,500,000 $ 675,000 Combined Total 5,175,000 Sales Complete this question by entering your answers in the tabs below. Net Income Accept or Reject Calculate the combined total net income if the company accepts the offer to sell additional units at the redu per unit. Additional Normal Volume Volume $ 4,500,000 $ 675,000 Combined Total 5,175,000 Sales 0 O 0 Costs and expenses: Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses Incremental income (loss) from new business 0 0 0 0 0 5,175,000 $ 4,500,000 $ 675,000