Exercise 12-7 Shelfield Company purchases sals and produces saiboats. It currently produces 1,300 saiboats per year, operating at normal capaoity, which is about 80 % of full capacity, Sheffield purchases sals at $269 each, but the company is considering using the excess capacity to manufacture the sails imstead. The manufacturing cost per sad would be $93.35 for direct materials, $85.13 for direct labor, and $90 for overhead. The $90 overhead is based on $78, 300 of annual fixed overhead that is allocated using normal capacity. The president of Sheffield has come to you for advice. "It would cost me $268.48 to make the sails, she says, "but only $269 to buy them. Should I continue buying them, or have 1 missed something? the a unt analysis of the dfferential costs (Round answers to 2 decimal places eg 15.25 If amount decreases net income then enter the amount aning either a negative sign preceding Prepare a number e.g.-45 or parentheses e.g. (45)).) Net Income Make Sails Buy Sails Increase (Decrease) Direct material Direct labor Variable overhead Purchase price Total unit cost Should Sheffield make or buy the sails?h he sals Sheffield should Variable overhead Purchase price Total unit cost Should Sheffield make or buy the sails? the sails Sheffield should If Sheffield suddenly finds an opportunity to rent out the unused capacity of its factory for $78,000 per year, would your answer to part (a) change? by $ This is because the net income will Exercise 12-1e Pina Inc. produces three separate products from a common process costing $100,400, Each of the products can be sold at the sple-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period Sales Value at Split Off Point Cost to Sales Value after Further Processing Further Product 10 $60,300 $100,200 $190,700 Product 12 15,500 29,600 34,000 Product 14 54,100 149,900 215,200 Determine total net income if all products are sold at the splt-off point Net income Determine total net income if all products are sold after further processing. Net income Calculate incremental profit/(loss) and determine which products should be sold at the splt off point and which should be processed further (Inter negative amounts using either a negative sign preceding the number e.g. 45 orparentheses e.g. (45).) Product Incremental profit (loss) Decision Product 10 Product 12 Product 14 Determine total net income using the results from previous part Net incomes Is the net income different from that determined in part (b)? net income is by S computer to handle its sales invoices. Lately,, business has been so good that it takes an etra 3 hours per night, plus every third Saturday, to keep up with the volume of sales ivoices Martinez Enterprises uses Management is considering updating its computer with faster model that would eliminate all of the overtime processing Current Machine New Machine Original purchase cost $15,300 $25.100 Accumulated depreciation $6,200 Estimated annual operating costs $24,800 $19,8009 Remaining useful life 5 years 5 years If sold now, the current machine would have a salvage value of $10,800, If operated for the remainder of its useful lide, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years Should the current machine be replaced? (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amoonts. In the third colomn, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the mumber e.g. 45 or parentheses eg. (45).) Net Income Increase Replace Machine Retain (Decrease) Machine Operating costs New machine cost Salvage value (old) Totali The current machine should be voson 4 24.14 Problem 12-2 The management of Blue Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product The following indormation was collected from the accounting records and productEtion data for the year ending December 31, 2017 1. 7,900 units of CISCO were produced in the Machining Department 2. Variable manudact drect materials $5.08 to the production of each CISCO unit were 3. Fixed manufacturing costs applicable to the production of CISCO were indirect labor $0.41, utilities $0.44. Cost Item Allocated Direct Depreciation $1.900 $910 Property taxes 540 340 Insurance 920 580 $3.360 $1,830 All variable manufacturing and direct fixed costs will be eliminated d CISCO is purchased, Allocated costs wl have to be absorbed by other production departments 4. The lowest quotation for 7.900 CISC0 unts from a supplier is $79.899 5. If CISCO units are purchased, freight and inspection costs would be $0.37 per unt, and receiving costs totaleg $1220 per wear wou be incrred r the Machning Deeastent- Prepare an incremental analysis for CISCO, (1 amoant decreases net income then enter the amount arsing either a negative sign preceding the nember eg. 45 or parentheses ee. (45).) Net Incomes Increase Make CISCO Bary CISCO (Decrease) Direct material Direct labor Indirect labor Utities Depreciation Property taxes Insurance Purchase price Freight and inspection Receiving costs Total annual cost Based on your analysis, what decision should management make? The company should Would the decision be different d lue Company has the opportumnity to produce $3,000 of net income with the facilities currently being used to manufacture CISSCO Click if you would like to show Work for this question: Open Show Work