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Wildhorse, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit
Wildhorse, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 20,000 Tri-Robos is as follows. Cost Direct materials ($48 per robot) $960,000 Direct labor ($40 per robot) 800,000 Variable overhead ($6 per robot) 120,000 Allocated fixed overhead ($30 per robot) 600,000 Total $2,480,000 Wildhorse is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,260,000. Following are independent assumptions. Assume that $405,000 of the fixed overhead cost can be avoided. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase Make Buy [Decrease) Direct materials $ $ Direct labor Variable overhead Fixed overhead Purchase price Total annual cost $ Using incremental analysis, determine whether Wildhorse should accept this offer. The offer eTextbook and Media Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Wildhorse can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase Make Buy (Decrease) Direct materials $ $ Direct labor Variable overhead Fixed overhead Opportunity cost Purchase price Totals $ $ Based on the above assumptions, indicate whether the offer should be accepted or rejected? The offerCurrent Attempt in Progress The management of Ivanhoe Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2022. 1. 7,900 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.11, direct labor $4.54, indirect labor $0.46, utilities $0.41. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $2,000 $880 $2,880 Property taxes 470 430 900 Insurance 910 660 1,570 $3.380 $1,970 5,350 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 7,900 CISCO units from a supplier is $83,562. 5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,270 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase Make CISCO Buy CISCO [Decrease) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Insurance Purchase price Freight and inspection Receiving costs Total annual cost $ $ (b) Based on your analysis, what decision should management make? The company should (c) Would the decision be different if Ivanhoe Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO?Blossom Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Blossom Street is considering finishing the bookcases and selling them for $71. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Blossom Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Process Net Income Sell Further Increase (Decrease) Sales price per unit Cost per unit Variable Fixed Total Net income per unit The bookcases eTextbook and MediaCrane Company has a factory machine with a book value of $86,000 and a remaining useful life of 7 years. It can be sold for $30,900. A new machine is available at a cost of $429,700. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $576,000 to $459,000. Prepare an analysis showing whether the old machine should be retail Next question Is, enter costs and expenses as positive amounts, and any amounts received as negative amounts acreases as positive amounts and decreases as negative amounts. Enter negative amounts using either d freguuve aign provcung wic numnumlog. -45 or parentheses eg. (45).) Retain Replace Net Income Equipment Equipment Increase (Decrease) Variable manufacturing $ costs New machine cost Sell old machine Total The old factory machine should be V eTextbook and MediaCrane Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing. Current Machine New Machine Original purchase cost $14,600 $25,300 Accumulated depreciation $6,400 Estimated annual operating costs $24,900 $19,500 Remaining useful life 5 years 5 years If sold now, the current machine would have a salvage value of $8,800. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years. Prepare an incremental analysis to determine whether the current machine should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45).) Net Income Retain Replace Increase Machine Machine [Decrease) Operating costs New machine cost Salvage value (old) Total The current machine should be VBetty Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Cullumber Company's six divisions. Betty made the following presentation to Cullumber's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $26,500." The Other Percy Five Divisions Division Total Sales $1,663,000 $100,000 $1,763,000 Cost of goods sold 978,100 76,800 1,054,900 Gross profit 684,900 23,200 708,100 Operating expenses 529,000 49,700 578,700 Net income $155,900 $ (26,500 ) $129,400 In the Percy Division, cost of goods sold is $60,500 variable and $16,300 fixed, and operating expenses are $29,100 variable and $20,600 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Betty right about eliminating the Percy Division? Prepare a schedule to support your answer. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase Continue Eliminate [Decrease) Sales $ Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs Cost of goods sold Operating expenses Total fixed Net income (loss) Betty is VBlossom, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $4,000 from sales $199,000, variable costs $174,000, and fixed costs $29,000. If the Big Bart line is eliminated, $19,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45).) Net Income Continue Eliminate Increase (Decrease) Sales Variable costs Contribution margin Fixed costs Net Income / (Loss) $ The Big Bart product line should be V eTextbook and Media
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