oo mobily 1:34 PM Bassam ACCT212 181 - Assignment 2 ACCT212 SEM 181-ASSIGNMENT2 Gruden Company produces golf discs which it normally sells to retailers for SR7 each. The cost of manufacturing 20,000 golf discs is: s 10000 0,000 Fised overhead 100.000 Gruden also incurs 5% sales commission(SR035) on each disc sold McGee Corporation offers Gruden SR4.80 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 Graden accepts the offer, its fixed overhead will increase from SR40,000 to SR46,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order (a) Prepare an incremental analysis for the special order Reject Order Accept Order Net Income (Decrease) Revenues Materials Labor Variable overhead Fixed overhead Net income b) Should Gruden accept the spedial order? Why or why not? (c) What assumptions underlie the dedsion made in part (b)? 3 of 19 ACCT212 SEM 181-ASSIGNMENT2 QUESTION 2 Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating a 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are SR4 and SRS, respedtively Normal production is 30,000 table lamps per year. A supplier offers to make the lamp shades at a price of SR12.75 per unit If Schopp Inc. accepts the suppliers offer, all variable manufacturing costs will be eliminated, but the SR45,000 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products (a) Prepare the incremental analysis for the decision to make or buy the lamp shades Net Income Increase Make Buy Direct materials Direct labor Variable overhead costs Fixed manufacturing costs Total annual cost (b) Should Schopp Inc. buy the lamp shades? Show your calculations above c) Would your answer be different in (b) if the productive capacity released by not making the lamp shades coukd be used to produce income of SR25,0007 4 of 19 ACCT212 SEM 181-ASSIGNMENT2 On Janaary 2, 2013, Benson Hospital purchased a SR100,000 special radiology scanner from Picard Inc. The scanner had a useful life of 4 years and was estimated to 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 SR105,000 Approximatedly one year later, the hospital is approached by Dyno Technology salesperson, Meg Ryan, who indicated that purchasing the scanner in 2013 from Picard Inc. was a mistake She points out that Dyno has a scanner that will save Benson Hospital SR30000 a year in operating expenses over its 3-year useful life. She notes that the new scanner w cost SR110,000 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 Ryan agrees to buy the old scanner from Benson Hospital for SR40000 (a) If Benson Hospital sells its old scanner on January 2,2014,compute the gain or loss on the sale (b) Using incremental analysis, determine if Benson Hospital should purchase the new scanner on January 2, 2014. Use the format below for your answer Retain Scanner Replace Net Income Increase Decrease) Scanner Annual operating costs New scanner cost Old scanner salvage Total (c) Explain why Benson Hospital might be reluctant to purchase the new scanner, regardless of the resalts indicated by the incremental analysis in (b)