Exercise 13-15 (Algo) Dropping or Retaining a Segment [LO13-2] Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows. Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line? Exercise 13-3 (Algo) Make or Buy Decision [LO13-3] Tray Engines, Limited, manufactures a variety of engines for use in heavy equlpment. The company has always produced all of the necessary parts for its engines; including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $35 per unit. To evaluate this offer. Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally: Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 16.000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. The segment margin of the new product would be $160,000 per yeat. Given this new assumption, what would be the financial advantage (disadvantage) of buying 16,000 carburetors from the outside supplier? 4 . Given the new assumption in requitement 3 , should the outside supplier's offer be accepted? Complete this question by entering your answers in the tabs below. Exercise 13-4 (Algo) Special Order Decision [LO13-4] Imperial Jewelers manufactures and sells a gold bracelet for $404.00. The company's accounting system says that the unit product cost for this bracelet is $270.00 as shown below: The members of a wedding party have approached Imperial Jewelers about buying 21 of these gold braceiets for the discounted price of $364.00 each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $7. Imperial Jewelers would also have to buy a special tool for $460 to apply the fligree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is foxed and unaffected by variations in how much jewelry is produced in any given period. However $8.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party's order using its existing manufacturing capacity. Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order? Complete this question by entering your answers in the tabs below
