Homework answers / question archive / __________ is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure The management of Kabanuck Corporation is considering dropping product V41B

__________ is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure The management of Kabanuck Corporation is considering dropping product V41B

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1. __________ is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure
2. The management of Kabanuck Corporation is considering dropping product V41B. Data from the company's accounting system appear below:
   
   
   Sales $938,000
   Variable expenses $413,000
   Fixed manufacturing expenses $525,000
   Fixed selling and administrative expenses $352,000
   
   
   All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $215,000 of the fixed manufacturing expenses and $126,000 of the fixed selling and administrative expenses are avoidable if product V41B is discontinued.
   
   What would be the effect on the company's overall net operating income if product V41B were dropped?
3. The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 240,000 wheels annually are:
   
   
   Direct materials $48,000
   Direct labor $72,000
   Variable manufacturing overhead $36,000
   Fixed manufacturing overhead $74,000
   
   
   An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $29,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $76,600 per year. Direct labor is a variable cost.
   If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would:
4. Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows:
   
   
   Direct materials $49.3
   Direct labor $10.0
   Variable manufacturing overhead $2.0
   Fixed manufacturing overhead $17.9
   Variable selling & administrative expense $2.5
   Fixed selling & administrative expense $13.0
   
   The normal selling price of the product is $100.8 per unit.
   An order has been received from an overseas customer for 1,700 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.9 less per unit on this order than on normal sales.
   Direct labor is a variable cost in this company.
   
   Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $92.2 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?
5. Brown Corporation makes four products in a single facility. These products have the following unit product costs:
   
   Products
   A B C D
   Direct materials $13.60 $9.50 $10.30 $9.90
   Direct labor 18.70 26.70 32.90 39.70
   Variable manufacturing overhead 3.60 2.00 1.90 2.50
   Fixed manufacturing overhead 25.80 34.10 25.90 36.50
   Unit product cost $61.70 $72.30 $71.00 $88.60
   
   
   Additional data concerning these products are listed below.
   
   
   Products
   A B C D
   Grinding minutes per unit 3.10 4.20 3.60 2.70
   Selling price per unit $75.40 $92.80 $86.70 $103.50
   Variable selling cost per unit $ 1.50 $ .50 $ 2.60 $ .90
   Monthly demand in units 3,300 3,300 2,300 2,500
   
   
   
   The grinding machines are potentially the constraint in the production facility. A total of 53,000 minutes are available per month on these machines.
   
   Direct labor is a variable cost in this company.
   
   How many minutes of grinding machine time would be required to satisfy demand for all four products?
6. Brown Corporation makes four products in a single facility. These products have the following unit product costs:
   
   Products
   A B C D
   Direct materials $13.30 $9.20 $10.00 $9.60
   Direct labor 18.40 26.40 32.60 39.40
   Variable manufacturing overhead 3.30 1.70 1.60 2.20
   Fixed manufacturing overhead 25.50 33.80 25.60 36.20
   Unit product cost $60.50 $71.10 $69.80 $87.40
   
   
   Additional data concerning these products are listed below.
   
   
   Products
   A B C D
   Grinding minutes per unit 2.80 3.60 3.30 2.40
   Selling price per unit $75.10 $92.50 $86.40 $103.20
   Variable selling cost per unit $ 1.20 $ .20 $ 2.30 $ .60
   Monthly demand in units 3,000 3,000 2,000 2,200
   
   
   
   The grinding machines are potentially the constraint in the production facility. A total of 52,700 minutes are available per month on these machines.
   
   Direct labor is a variable cost in this company.
   
   How many minutes of grinding machine time would be required to satisfy demand for all four products?
7. Kosakowski Corporation processes sugar beets in batches. A batch of sugar beets costs $74 to buy from farmers and $17 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $31 or processed further for $21 to make the end product, industrial fiber that is sold for $52. The beet juice can be sold as is for $50 or processed further for $28 to make the end product, refined sugar that is sold for $100. How much more profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?
8. Exercise 9-9 Budgeted Balance Sheet [LO9-10]
   The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:
   
   
   Ending Balances
   Cash ?
   Accounts receivable $ 9,500
   Supplies inventory $ 3,400
   Equipment $ 41,000
   Accumulated depreciation $ 16,600
   Accounts payable $ 3,200
   Common stock $ 5,000
   Retained earnings ?
   
   
   
   The beginning balance of retained earnings was $31,000, net income is budgeted to be $21,400, and dividends are budgeted to be $3,900.
   
   Required:
   Prepare the company's budgeted balance sheet. (Amounts to be deducted should be indicated by a minus sign.)
9. Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:
   
   Standard Quantity Standard Price
   or Rate Standard Cost
   Direct materials 2.30 ounces $ 26.00 per ounce $ 59.80
   Direct labor 0.50 hours $ 14.00 per hour 7.00
   Variable manufacturing overhead 0.50 hours $ 3.40 per hour 1.70
   $ 68.50
   
   
   
   During November, the following activity was recorded relative to production of Fludex:
   
   a. Materials purchased, 12,500 ounces at a cost of $305,625.
   b. There was no beginning inventory of materials; however, at the end of the month, 2,800 ounces of material remained in ending inventory.
   c. The company employs 21 lab technicians to work on the production of Fludex. During November, they worked an average of 150 hours at an average rate of $12.00 per hour.
   d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,200.
   e. During November, 4,200 good units of Fludex were produced .
   
   Required:
   1. For direct materials:
   
   a. Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
   
   
   b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?
   
   2. For direct labor:
   
   a. Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
   
   
   b. In the past, the 21 technicians employed in the production of Fludex consisted of 4 senior technicians and 17 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued?
   
   3. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)