Accounting 102 Chapter 7 Assignment

ACC 102 Chapter 7

Exercise 7-2

Reject Accept

Order Order Net Income

Revenues $0 $23,750 $23,750

Materials $0 -$2,500 -$2,500

Labor $0 -$7,500 -$7,500

Variable Overhead$0 -$5,000 -$5,000

Fixed Overhead $0 -$5,000 -$5,000

Sales Commissions$0 $0 $0

Net Income $0 $3,750 $3,750

Gruner should accept the special order because incremental revenue exceeds expenses by $3,750.

The assumption that sales of the golf discs in other retailers would not be affected.

Exercise 7-5

Make Buy Net Income -+

Dir. Materials$150,000 $0 $150,000

Dir. Labor $180,000 $0 $180,000

Var. costs $126,000 $0 $126,000

Fixed costs $45,000 $45,000 $0

Purchase Price 0 465,000 -465,000

Annual Cost $501,000 $510,000 ($9,000)

b) Swayze Inc. should not purchase the lamp shades because it would cost $9,000 more.

c) Yes, because it would be saving the company $26,000

Make Buy Net Income

Annual Cost $501,000 $510,000 ($9,000)

Opportunity cost $35,000 $35,000 $0

Total Cost $536,000 $510,000 ($26,000)

Exercise 7-8

Make IMC2 Buy IMC2 Net Income

Dir. Mat. $65.00

Dir . Labor $48.00

Mat. Handling 6.5 $0 6.5

Var. Overhead 60 0 60

Purchase Price 0 $200 -200

Total Price $179.50 $200 ($20.50)

b) Interdesign would need to know the opportunity costs for manufacturing the other product. Purchasing the product from another market would cost the company $20,500 more, causing Interdesign to have to increase their contribution margin.

c) Qualitative factors that would have to be considered are: quality of component, on time delivery, and reliability of the vendor.

Exercise 7-10

a) Sales (50,000+10,000+60,000)= $120,000

Joint costs $100,000

Net Income $20,000

b) Sales (190,000+35,000+220,000)=$445,000

Joint costs -100,000

Additional costs(100,000+30,000+150,000)=-280,000

Net Income $65,000

C) Product 12 Product 14 Product 16

Inc....