Sato Jewellers has had a request for a special order for 10 gold bangles for the members of a wedding party. The normal selling price of a gold bangle is $389.95 and its unit product cost is $264.00, as shown below:

Direct materials$143.00Direct labour86.00Manufacturing overhead35.00Unit product cost$264.00

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewellery is produced in any given period. However, $7 of the overhead is variable, depending on the number of bangles produced. The customer would like special filigree applied to the bangles. This filigree would require additional materials costing $6 per bangle and would also require acquisition of a special tool costing $465 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order.

Required:

a.What effect would accepting this order have on the company's operating income if a special price of $349.95 is offered per bangle for this order?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net operation income: by:

Should the special order be accepted at this price?

yes or no

Q 2

In a joint processing operation, Nolen Company manufactures three grades of sugar from a common input, sugar cane. Joint processing costs up to the split-off point total $80,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: raw sugar, $40,000; brown sugar, $40,000; and white sugar, $42,000.

Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

ProductAdditional

Processing CostsSales

ValueRaw sugar$42,000$80,000Brown sugar$28,000$70,000White sugar$12,000$82,000

Required:

a.Compute the Incremental profit (loss) for each product.(Loss amounts should be indicated by a minus sign.)

Raw sugar Brown Sugar White Sugar

Incremental profit (loss)

Q-2

Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniorshome nursing, Meals on Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow:

TotalHome

NursingMeals on

WheelsHouse-

keepingRevenues$900,000$260,000$400,000$240,000Variable expenses490,000120,000210,000160,000Contribution margin410,000140,000190,00080,000Fixed expenses:Depreciation68,0008,00040,00020,000Liability insurance42,00020,0007,00015,000Program administrators' salaries115,00040,00038,00037,000General administrative overhead*180,00052,00080,00048,000Total fixed expenses405,000120,000165,000120,000Operating income (loss)$5,000$20,000$25,000$(40,000)

*Allocated on the basis of program revenues.

The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and considers the operating income of $5,000 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ewa asked for more information about the financial advisability of discontinuing the housekeeping program.

The depreciation in the housekeeping category is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided.

Required:

1-a.Compute the change in net operating income for the company as a whole if housekeeping program be discontinued.

( )In net operating income( )