Problem 4-1

Logic Transport, Inc. owns a truck that cost him $90,000. The book value is $50,000 and is The remaining useful life is expected to be four years. The company has the opportunity to buy a truck for $70,000, fuel replacement is extremely efficient. The cost of Fuel for the old truck is $12,500 more per year than fuel for the new truck. He old truck is paid for, even though it is in good condition, you can sell it for $50,000. The company must replace the old truck with a new, more fuel-efficient truck, or You must continue to use the old truck until you are done spending. explain

Problem 4-2 Express Corporation sells footwear for men, women, and children. Operates by department for each footwear class and in a single establishment. The following is the statement of income and expenses for 2007.

Department Children:

Sales: $149,000 Cost of goods sold: (92,800) Tax Margin: 56,200 Department manager salary: (18,000) Sales commissions: (27,000) Rental expenses: (18,000) Utility expenses: (4,500) Net profit (loss): ($11,300)

Department Ladies:

Sales: $387,500

Cost of goods sold: (162,200)

Tax Margin: 225,300

Department manager salary:(36,000) Sales commissions: (73,800) Rental expenses: (18,000) Utility expenses: (4,500) Net profit (loss): $93,000

Department Gentlemen:

Sales: $522,250

Cost of goods sold: (238,900)

Tax Margin: 283,350

Department manager salary: (45,000) Sales commissions: (95,400) Rental expenses: (18,000) Utility expenses:(4,500)

Net Profit (loss): $120,450

a. Determine if the children's department should be removed. b. Confirm the findings in requirement a by preparing a statement of income and expenses of the corporation and without considering the children's department. c. Removing the boys' department increases the space for the men's departments and ladies. With this decision, management assumes that sales will increase net profit by $32,000. Will this information affect the opinion of the requirement to? explain

Problem 4-3 Assume that a division of Speakers Corporation makes electronic components for your speakers. In its manufacturing process the component is part of the "just-in-time" production system. All labor is considered overhead costs and all overheads are considered as fixed with with respect to production volume. Production costs per 100,000 units of the components are the following:

Direct Materials: $300,000 General expenses: Indirect labor: Materials: Cost distribution by occupation: 150,000 Total costs $450,000

Direct Materials: General expenses: Indirect labor: 80,000 Materials: 30,000 Cost distribution by occupation: 40,000 Total costs:

A local company offered to supply the components for $3.45 each. if the division discontinues production of the component, saves two-thirds of material costs and $30,000 of indirect labor costs. All other general expenses will continue. The division manager recently attended a seminar on cost behavior and You learned about fixed and variable costs. He wants to continue manufacturing the components because variable costs of $3.00 is lower than the auctioned $3.45 per unit.

1. Determine the relevant costs of (a) manufacturing the component and (b) purchasing the component. Which alternative is less expensive and by how much? 2. What qualitative factors can influence the decision to make or buy the component?

Problem #4-4 The Swenson Company produces a part that is used in the manufacture of one of its products. The Costs associated with the production of 10,000 units of this part are as follows: Direct Materials $100,000 Direct labor 170,000 Variable fixed 300,000 Fixed overhead 250,000 Total costs $820,000

Of the fixed overhead, $35,000 is avoidable. a.. Assuming there are no alternatives to use the facilities, does Swenson take advantage of the offer of the supplier who is willing to sell you 10,000 units of the same part for $64 per unit? b. Would you change the answer to alternative (a) if the facilities were rented for $50,000 per year?