Horngrens Accounting Chapter 26 problems:

• E26-19
• E26-20
• E26-21
• E26-24
• E26-25
• CP26-38

Problem 25-33 Making sell or process further decisions Sell immediately Incremental revenueet incremental profit Process further Incremental revenue Incremental development costs Net incremental profit 480,000 784,000 (150,000) 634,000 Exercise 25-18 Making outsourcing decisions Insourcing Direct materials Direct labor Variable overhead Incremental cost 11.00 4.50 6.00 21.50 Outsourcing Purchase price/incremental cost 20.00 Since the incremental cost of outsourcing is lower, Eclipse should purchase the switch instead of producing it. E25-15 Making product mix decisions Requirement (1) The contraint is the machine-hours available for production. Requirement (2) Sales price Variable costs: Direct materials Direct labor Variable manufacturing overhead Variable operating expenses Contribution margin per unit 1,040 570 (300) (78) (276) (115) 271 271 Contribution margin per machine hour (90) (190) (92) (67) 131 393 Tread Mile should produce the regular model because the higher contribution margin per unit of constraining resource. Requirement (3) Deluxe Fixed manufacturing overhead Fixed manufacturing overhead allocation percentage Regular 120 75% 40 25% 160 E25-13 Making or dropping a product decisions Requirement (1) With the DVD Discs line Total Sales Revenue Variable Costs Contribution Margin Fixed Costs Manufacturing Selling and Administrative Operating Income (Loss) 432,000 (240,000) 192,000 Blu-ray Discs 309,000 (150,000) 159,000 DVD Discs 123,000 (90,000) 33,000 (134,000) (69,000) (11,000) (75,000) (52,000) 32,000 (59,000) (17,000) (43,000) Total Sales Revenue Variable Costs Contribution Margin Fixed Costs Manufacturing Selling and Administrative Operating Income (Loss) 309,000 (150,000) 159,000 Blu-ray Discs 309,000 (150,000) 159,000 (134,000) (69,000) (44,000) (75,000) (52,000) 32,000 Expected decrease in revenue Expected decrease in variable costs Expected decrease in operating income DVD Discs (123,000) 90,000 (33,000) (59,000) (17,000) (76,000) Requirement (2) Dropping DVD's will not add $43,000 to operating income because some of the fixed costs determined in calculating operating income is not avoidable. E25-10 Making special pricing decisions Requirement (1) Increase in revenue Increase in variable costs Increase in contribution margin 18,150 (15,400) 2,750 Hungry-Cardz should accept the special sales order. Requirement (2) Increase in revenue Increase in variable costs Increase in contribution margin Additional development costs Net margin from the special sales order Hungry-Cardz should not accept the special sales order. 18,150 (15,400) 2,750 (5,000) (2,250)