Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 17, Problem 18E
A company is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing $1,300. Which of the following is relevant to the special order?
- a. $11.50
- b. $1.20
- c. $7.35
- d. $8.90
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A company is considering a special order for 1,000 units to be priced at $8.90 (the normal pricewould be $11.50). The order would require specialized materials costing $4.00 per unit. Directlabor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20per unit. However, the company has excess capacity, and acceptance of the order would notraise total fixed factory overhead. The warehouse, however, would have to add capacity costing$1,300. Which of the following is relevant to the special order?a. $11.50b. $1.20c. $7.35d. $8.90
Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The
customer would like modifications made to product A90 that would increase the variable costs by $4.20 per unit and that would require an investment of
$21,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has
ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special
order should be:
Multiple Choice
($18.600)
($16,200)
$30,000
$5,400
your corporation has received a request for a special order of 6,000 units of its products for $16 each. the product unit cost is as follows: (see attached image). the special order would have no effect on the company’s total fixed manufacturing overhead costs. of the special order is accepted, Variable selling cost would decrease by 60%. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. If the special order is excepted what is the impact on the companies overall net operating income?
Chapter 17 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 17 - What is tactical decision making?Ch. 17 - Tactical decisions are often small-scale decisions...Ch. 17 - What is tactical cost analysis? What steps in the...Ch. 17 - What is a relevant cost? Explain why depreciation...Ch. 17 - Give an example of a future cost that is not...Ch. 17 - Prob. 7DQCh. 17 - Can direct materials ever be irrelevant in a...Ch. 17 - What role do past costs play in tactical cost...Ch. 17 - When will flexible resources be relevant to a...Ch. 17 - Prob. 11DQ
Ch. 17 - Prob. 12DQCh. 17 - Prob. 13DQCh. 17 - Prob. 14DQCh. 17 - Why would a firm ever offer a price on a product...Ch. 17 - Each year, Basu Company produces 18,000 units of a...Ch. 17 - Reshier Company makes three types of rug...Ch. 17 - Sequoia Paper Products, Inc., manufactures boxed...Ch. 17 - Betram Chemicals Company processes a number of...Ch. 17 - Prob. 5ECh. 17 - Elliott, Inc., has four salaried clerks to process...Ch. 17 - Prob. 7ECh. 17 - Feinan Sports, Inc., manufactures sporting...Ch. 17 - Wehner Company is currently manufacturing Part...Ch. 17 - Brees, Inc., a manufacturer of golf carts, has...Ch. 17 - Prob. 11ECh. 17 - Nutterco, Inc., produces two types of nut butter:...Ch. 17 - Carleigh, Inc., is a pork processor. Its plants,...Ch. 17 - Global Reach, Inc., is considering opening a new...Ch. 17 - Tony and Tina Roselli own and run TNTs Pizza...Ch. 17 - Jason Rogers works full-time for UPS and runs a...Ch. 17 - Prob. 17ECh. 17 - A company is considering a special order for 1,000...Ch. 17 - Walloon Company produced 150 defective units last...Ch. 17 - Pasha Company produced 50 defective units last...Ch. 17 - Future costs that differ across alternatives are:...Ch. 17 - Thaler Company bought 26,000 of raw materials a...Ch. 17 - Norton Products, Inc., manufactures...Ch. 17 - Prob. 24PCh. 17 - Fiorello Company manufactures two types of...Ch. 17 - St. Johns Medical Center (SJMC) has five medical...Ch. 17 - Brandy Dees recently bought Nievo Enterprises, a...Ch. 17 - Apollonia Dental Services is part of an HMO that...Ch. 17 - Pharmaco Corporation buys three chemicals that are...Ch. 17 - KarlAuto Corporation manufactures automobiles,...Ch. 17 - Morrill Company produces two different types of...Ch. 17 - Paladin Company manufactures plain-paper fax...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it internally. The supplier will charge $20,000 for 20,000 pounds of the product. The costs per pound to make this product include: Cost per Pound $0.30 Direct Labor Direct Materials $0.60 $0.70 Allocated Unavoidable Overhead If Daily Kneads outsources, what is the savings (or loss) per pound for the company as a whole? If the amount is a loss include a negative sign (not parentheses) in your answer. "_"arrow_forwardyour corporation has received a request for a special order of 6000 units of its product for $16 each. The product unit cost is as follows:(see attached image). The special order would have no effect on the companies total fixed manufacturing overhead cost. If the special order is excepted variable selling cost would decrease by 60%. The special order would have no effect on the companies other sales. The company has ample spare capacity for producing the special order. If the special order is excepted, what is the impact on the companies overall net operating income? a) $13,920 b) $9,600 c) $16,080 d) $20,400arrow_forwardABC Company is introducing a new product. The managers are trying to decide whether to make one of its components or to buy it from an outside supplier. The space that could be used to make the part has no alternative use. The outside supplier will sell the part to ABC for P800 per unit. Following is an estimate of per-unit costs if ABC makes the part: Materials P225 ; Direct labor P250 ; Variable manufacturing overhead P225 ; Fixed manufacturing overhead P325. Fixed manufacturing overhead consists of depreciation on machinery and a share of the costs of the factory based on the floor space that manufacturing the part would occupy. Determine whether ABC should make or buy the part. Also you have to indicate the amount favoring the better alternative. please answerarrow_forward
- your corporation has received a special order of 6,000 units of its products for $16 each. the product unit cost is as follows: (see attached image). the special order would have no effect on the company’s total fixed manufacturing overhead costs. if the special order is accepted, variable selling costs would decrease by 40%. This special order would have no effect on the company’s other sales. the company had ample spare capacity for producing the special order. if the special order is accepted, what is the impact on the company’s overall net operating income? a) $9,600 b) $13,920 c) $16,020 d) $20,400arrow_forwardPharoah Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Pharoah' market research department has recommended an introductory unit sales price of $28.00. The selling expenses are estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. 2. Labor-Intensive $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Break-even point in units Capital-Intensive Labor-Intensivearrow_forwardRough N' Tough (RNT) manufactures outdoors accessories. Management is considering producing the poles for their tents rather than continuing to purchase from their current supplier. The supplier charges $60 per set of poles.The cost accounting team has estimated that RNT would incur the following costs if they were to produce the poles instead: $40 per set for direct materials, $10 per set for direct labor, $7 per set for variable overhead, and $20 per set for fixed overhead application.RNT currently has unused production capacity and manufacturing equipment that could be used to manufacture the poles. RNT has planned to sell 5,000 tents this year. What would the change in overall cost be for the company if RNT produced the poles rather than purchasing them?arrow_forward
- Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. (b) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit Your answer is correct. $3,200,000 Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units eTextbook and Media Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit…arrow_forwardThe Comfy Company manufactures slippers and sells them at $11 a pair. Variable manufacturing cost is a $5 pair, and allocated fixed manufacturing cost is a $3 pair. It has enough idle capacity available to accept a one-time-only special order of 5000 pairs of slippers at $8 a pair. Comfy will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $15000 increase, (c) $25000 increase, or (d) $40000 increase? Show your calculations. The HoustonCompany manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 38 Variable manufacturing overhead 15 Fixed manufacturing overhead allocated 18 Total manufacturing cost per unit $75 The Cushion Company has offered to sell…arrow_forwardLakeside Inc. produces a product that currently sells for $82.80 per unit. Current production costs per unit include direct materials, $23; direct labor, $25; variable overhead, $11.50; and fixed overhead, $11.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $9.20 per unit? (Round your final answer to 2 decimal places.) b. Should Lakeside outsource part of the conversion process at a cost of $9.20 per unit? O Yes O Noarrow_forward
- Lakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include direct materials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $5.20 per unit? Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit? a. b. Should Lakeside outsource conversion process at this cost?arrow_forwardFutura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 7.00 2.20 1.80 1.20 0.40 0.50 $ 13.10 Total $ 118,800 $ 79,200 $ 33,000 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant and can't be avoided. The total rent on the plant is $81,000…arrow_forwardFutura Company purchases the 74,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.60 1.50 0.60 0.40 $ 13.10 Total $ 118,400 $ 111,000 $ 29,600 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Job Cost Sheet - Job Cost Accounting System; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=ElD8nKNXE1I;License: Standard Youtube License