Exercise 7.18 a-c Gruden Company produces golf discs, which it normally sells to retailers for $9 each. The cost of manufacturing 20,000 golf discs is: Materials $9,600 Labour 31,000 Variable overhead 18,000 Fixed overhead 42,000 Total $100,600 Gruden also incurs 5% sales commission ($0.45) on each disc sold. McGee Corporation offers Gruden $4.50 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $42,000 to $47,100 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Prepare an incremental analysis for the special order. ( Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.) Incremental contribution margin $ #Incremental cost: Fixed cost Incremental income $Exercise 7.23 a-d Bahrat, Inc. produces three separate products from a common process costing $100,800. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. The cost and selling price data for a recent period are as follows: Sales Value at Cost to Sales Value after Split-Off Process Further Point Further Processing Product 12 $50,000 $100,800 $190,300 Product 14 10,100 30,100 35,700 Product 16 59,700 150,400 220,300 Determine the total net income if all products are sold at the split-off point. Total net income $ Determine the total net income if all products are sold after further processing. Total net income $Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Incremental Profit/ (Loss) Decision Product 12 $ 4F Product 14 $ AF Product 16 $ Determine the total net income using the results from the previous part of the question. Total net income $Exercise 7.25 a-b On January 2, 2019, Riverside Hospital purchased a $105,000 special radiology scanner from Faital Inc. The scanner has a useful life of five years and will have no disposal value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating costs with this scanner are $105,900. Approximately one year later, the hospital is approached by Alliant Technology salesperson Jinsil Soon, who indicates that purchasing the scanner in 2019 from Faital was a mistake. She points out that Alliant has a scanner that will save Riverside Hospital $25,200 a year in operating expenses over its four-year useful life. She notes that the new scanner will cost $119,300 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Alliant agrees to buy the old scanner from Riverside Hospital for $60,800. Assume Riverside Hospital sells its old scanner on January 2, 2020. Calculate the gain or loss on the sale. If Riverside Hospital sells its old scanner it incurs a of $ Using incremental analysis, determine whether Riverside Hospital should purchase the new scanner on January 2, 2020. (If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).) Net Income Retain Scanner Replace Scanner Increase (Decrease) Operating cost $ $ New scanner cost Old scanner salvage Total $ $
