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Exercise 4-32 Special Orders (L.O. 1, 2) Carlsbad Enterprises has a capacity to produce 420,000 computer cases per year. The company is currently producing and selling 340,000 cases per year at a selling price of $397 per case. The cost of producing and selling one case follows: Variable manufacturin g costs Fixed manufacturin g costs Variable selling and administrativ e costs Fixed selling and administrativ e costs $ 158 39 81 19 Total costs $ 297 The company has received a special order for 20,000 cases at a price of $251 per case. Because it does not have to pay a sales commission on the special order, the variable selling and administrative costs would be only $51 per case. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations: Selling price per case Variable manufactu ring costs Fixed manufactu ring costs Variable selling and administra tive costs Fixed selling and administra tive costs Net loss per case $ 251 158 39 51 19 $ (16) Required: (a Calculate the differential profit/loss if the order is accepted. (Enter your ) amounts in thousands of dollars. Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) All revenues and costs in thousands of dollars Status Quo Alternative 340,000 Units 360,000 Units Difference $ $ $ (Click to select) Revenues Variable costs: Manufacturi ng (Click to select) Selling and administrative (Click to select) $ Contribution margin $ $ (Click to select) (Click to select) Fixed costs $ Operating profit $ $ (Click to select) (b Based on the above should Carlsbad Enterprises accept the special order? ) (Click to select) Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units): Dir ect mat erial s Dir ect labo r Var iable $ 28 51 20 over hea d Fix ed over hea d 47 $ Total 146 Trailblazers offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management will buy instead of make if Mobility can save at least $20,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $41,900. Required: (a Prepare a schedule that shows the differential costs on the 2,000 rear wheel ) assemblies order. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) Trailblazers' offer Status Quo $ Alternative $ Difference $ (Click to select) Materials (Click to select) Labor (Click to select) Variable overhead Fixed overhead applied Total costs (Click to select) (Click to select) $ $ $ (Click to select) (b Should Mobility make rear wheel assemblies or buy them from Trailblazers? ) (Click to select) Exercise 5-26 Methods of Estimating Costs: High-Low (L.O. 4) Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last year's operations: Mont Labor-Hours h MachineHours 1 725 715 1,415 3 4 5 6 670 745 775 755 1,518 1,462 1,589 1,584 7 735 1,387 8 725 1,318 9 715 1,463 10 11 12 790 670 700 102,77 9 103,75 8 109,827 108,384 116,252 114,515 107,07 7 102,03 0 106,39 6 113,035 101,638 114,758 1,362 2 Overhead Costs $ 1,540 1,288 1,608 Required: (a Use the high-low method to estimate the fixed and variable portions of overhead ) costs based on machine-hours. (Round your variable cost answer to 2 decimal places. Omit the "$" sign in your response.) $ Variable cost (per machine hour) $ Fixed cost (b Managers expect the plant to operate at a monthly average of 1,600 machine) hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Use rounded variable cost. Omit the "$" sign in your response.) Overhead costs $ Regression Analysis using Excel See Appendix A in Chapter 5 Regression Analysis using MS Excel This exercise describes how to estimate the coefficients using MS Excel 2010. Use the data contained in the Excel file called Learning Activities Excel Data. Step 1: Ensure that the Analysis ToolPak is installed in MS Excel. Open Excel and click on the Data tab. \"Data Analysis\" will show as an option under \"Analysis\". If \"Data Analysis\" is there, proceed to Step 2, otherwise you must activate this feature in Excel. To do so, click \"File\" in the upper-left corner of your workbook, then select \"Options\". Select \"Add-Ins\" and then \"Analysis ToolPak\" and click \"Go.\" Check mark the Analysis ToolPak and click \"OK.\" Data Analysis features should now be enabled. Proceed to Step 2. Step 2: Enter Data for the Dependent and Independent Variables Open the Excel file called Learning Activities Excel Data and click on the first tab, called LA#3. You should see a blue table with 4 columns of data: month,Overhead costs, repair hours and part costs. Step 3: Select the Data Analysis Options Select the Data tab, then Data Analysis and then choose Regression. Step 4: Select the data to analyze Once the Regression dialogue box is opened, it will ask for the input data ranges. Click in the InputY range box to input the dependent variable data. Highlight the Overhead cost data including the words "Overhead Costs." This is the dependent variable range because the overhead costs will vary depending upon the number of repair hours needed. Then click in the Input-X range box to enter the independent variable, in this the repair hours. Highlight the label and numbers in the Repair hours column. Make sure that there is a check mark in the Labels box, and the Confidence level box. Leave the percentage at 95%. Select New Worksheet and Click \"OK.\" The regression analysis results will display in a new worksheet. this solution should match the one found on page 179 of your book in Exhibit 5.18. Step 5: Multiple Regression Analysis The above steps can be repeated to run a multiple regression analysis. Simply select more independent variables. Simply select more than one column of data when inputting the X-range. Step 6: Save and Upload your Results Save your Excel File and upload your results into Connect using the Upload button. Exercise 5-32 Interpretation of Regression Results: Multiple Choice (L.O. 5) Cortez Company is planning to introduce a new product that will sell for $106 a unit. The following manufacturing cost estimates have been made on 20,000 units to be produced the first year: Direct materials Direct labor $ 800,00 0 800,00 (= $16 per hour 50,000 0hours) Manufacturing overhead costs have not yet been estimated for the new product, but monthly data on total production and overhead costs for the past 24 months have been analyzed using simple linear regression. The following results were derived from the simple regression and provide the basis for overhead cost estimates for the new product. Simple Regression Analysis Results Dependent variableFactory overhead costs Independent variableDirect labor-hours Computed values Intercept Coefficient on independent variable Coefficient of correlation R2 120,00 0 $ 4.00 .913 .834 $ Required: (a What percentage of the variation in overhead costs is explained by the ) independent variable? (Click to select) (b What is the total overhead cost for an estimated activity level of 70,000 direct ) labor-hours? (Click to select) (c How much is the variable manufacturing cost per unit, using the variable ) overhead estimated by the regression (assuming that direct materials and direct labor are variable costs)?(Round your answer to the nearest dollar amount.) (Click to select) (d What is the expected contribution margin per unit to be earned during the first ) year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed.) (Click to select) (e What is the manufacturing cost equation implied by these results? ) (Click to select) Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Overhead costs $ 9,891 $ 9,244 $ 13,200 $ 10,555 $ 9,054 $ 10,662 $ 12,883 $ 10,345 $ 11,217 $ 13,269 $ 10,830 $ 12,607 $ 10,871 $ 12,816 $ 8,464 Repair Hours 248 248 480 284 200 380 568 344 448 544 340 412 384 404 212 Part Costs $ 1,065 1,452 3,500 1,568 1,544 1,222 2,986 1,841 1,654 2,100 1,245 2,700 2,200 3,110 752 Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Overhead costs $ 9,891 $ 9,244 $ 13,200 $ 10,555 $ 9,054 $ 10,662 $ 12,883 $ 10,345 $ 11,217 $ 13,269 $ 10,830 $ 12,607 $ 10,871 $ 12,816 $ 8,464 Repair Hours 248 248 480 284 200 380 568 344 448 544 340 412 384 404 212 Part Costs $ 1,065 1,452 3,500 1,568 1,544 1,222 2,986 1,841 1,654 2,100 1,245 2,700 2,200 3,110 752