Professional Documents
Culture Documents
*In columns (a) and (b), parentheses denote costs, and numbers
without parentheses are revenues.
Utilities ...............................................................................................
Depreciation of building ...................................................................
Deli managers salary .......................................................................
Total ....................................................................................................
$ 4,350
6,000
4,500
$14,850
$67,500
30,000
37,500
$18,000
6,000
3,750
27,750
$ 9,750
Relevant data:
Current sales value for unmodified parts .......................................$7,000
Sales value for modified parts ......................................................... 20,300
Modification costs ............................................................................. 10,000
Irrelevant data:
Current book value of inventory ...................................................... 19,500
This is a sunk cost. It will not affect any future course of
action.
2.
Sales
Less: Variable
costs.
Contribution
margin.
Paint and
Supplies
Carpeting
Wallpaper
$1,900,000
1,140,000
$2,300,000
1,610,000
$ 700,000
560,000
$ 760,000
$ 690,000
$ 140,000
$(140,000)
(62,000)
325,000
90,000
(152,000)
(125,000)
$ (64,000)
3.
50,000
20,000
30,000
15,000
Conclusion:Manufacture....................................20,000 blenders
Manufacture........................15,000 food processors
Purchase 13,000 food processors
2.
blenders
3. In the electronic version of the solutions manual, press the
CTRL key and click on the following link: 10E - BUILD A
SPREADSHEET 14-46.XLS
PROBLEM 14-47 (25 MINUTES)
1.
2.
3.
$ 90,000
18,000
$ 108,000
$ 6,000
1,200
48,000
24,000
$ 79,200
$ 28,800
$288,000
150,000
$ 138,000
$312,000
288,000
$ 24,000
Enhanced
$750.00
$990.00
$84.00
$135.00
45.00
60.00
72.00
96.00
75.00
99.00
276.00
390.00
$474.00
$600.00
2.
3.
4.
Standard
Enhanced
$474,000
$480,000
20,000
30,000
$454,000
$450,000
1. The costs that will be relevant in Peters analysis of the special order
being considered by Treasure Island Beach Equipment, Inc. are those
expected future costs that are applicable to a particular decision (the
costs that will differ between the alternatives of accepting or rejecting the
offer). Only the variable costs of labor and material are relevant. Since the
order was received directly by Treasure Island Beach Equipment, Inc.,
variable marketing is not relevant, because additional marketing costs will
not be incurred under this order. Also, the fixed costs are not relevant,
because no additional capital investments are needed to meet the order.
The firm is operating below full capacity and will be able to absorb this
order.
2. Management should accept the offer. Although the combined average unit
cost of $446.25 is higher than the price offered ($300), the incremental
average unit cost is only $255 for the units in the special order. Accepting
the special order will result in a contribution per unit of $45 ($300 less
$255) and a total additional contribution margin of $28,125 (625 units
$45). The calculations follow.
Current Monthly
Special
Production
Order
Units produced ....................................................................
1,875
625
a
Sales .....................................................................................
$ 984,375
$187,500b
Variable costs: .....................................................................
Direct labor .......................................................................
$ 281,250
$93,750c
Direct material ..................................................................
196,875
65,625d
Marketing ..........................................................................
140,625
Marketing ..........................................................................
131,250
g
Average unit cost ...........................
$510.00
$255.00
Combined
Production
2,500
$1,171,875
$ 375,000
262,500
140,625
$ 778,125
$ 206,250
131,250
$ 337,500
$1,115,625
$ 56,250
$311.25
135.00
$446.25
3.
Samantha Peters could try to resolve the ethical conflict arising out of the
controllers insistence that the company avoid competitive bidding by
taking the following steps:
She should follow the companys established policies on such matters.
If such policies do not exist, or if they do not resolve the conflict, she
should discuss the situation with her manager unless, as in this case,
the manager is involved in the conflict. Then, she should discuss the
situation with the managers supervisor.
If this approach does not help her resolve the matter, then she should
continue going to the next-higher managerial level, including the audit
committee of the board of directors, if necessary.
She should clarify relevant concepts by confidential discussions with
an objective advisor to obtain an understanding of possible courses of
action.
If the ethical conflict still exists after exhausting all of these avenues of
internal review, she may have to resign from the company and submit
an informative memorandum to the board of directors.
5. In the electronic version of the solutions manual, press the CTRL key and
click on the following link: 10E - BUILD A SPREADSHEET 14-52.XLS
Total for
32,000
Units
276,800
3,000
$279,800
48,000
42,000
18,000
$287,520
$ (7,720)
$112,320
67,200