BUS-317 Topic 6 WileyPLUS Assignment
Question 1
Blossom Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2022, the company reported the following operating results while operating at 80% of plant capacity and producing 119,900 units.
| Amount | |||
| Sales | $4,676,100 | ||
| Cost of goods sold | 3,527,059 | ||
| Selling and administrative expenses | 482,601 | ||
| Net income | $666,440 |
Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $244,000.
In July, normally a slack manufacturing month, Blossom receives a special order for 10,000 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.73 per unit because of shipping costs but would not increase fixed costs and expenses.
(a) Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
(b) Should Blossom Inc. accept the special order?
(c) What is the minimum selling price on the special order to produce net income of $5.03 per ball? (Round answer to 2 decimal places, e.g. 15.25.)
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Question 2
The management of Cullumber 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. 8,000 units of CISCO were produced in the Machining Department.
2. Variable manufacturing costs applicable to the production of each CISCO unit were:
direct materials $5.10, direct labor $4.88, indirect labor $0.45, utilities $0.44.
3. Fixed manufacturing costs applicable to the production of CISCO were:
| Cost Item | Direct | Allocated | ||||
| Depreciation | $1,900 | $920 | ||||
| Property taxes | 490 | 420 | ||||
| Insurance | 890 | 620 | ||||
| $3,280 | $1,960 | |||||
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 8,000 CISCO units from a supplier is $87,390.
5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,310 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).)
(b) Based on your analysis, what decision should management make?
(c) Would the decision be different if Cullumber Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO?
Question 3
Oriole Industrial Products Inc. is a diversified industrial-cleaner processing company. The company’s Dargan plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week, 904,500 ounces of chemical input are processed at a cost of $210,300 into 603,000 ounces of floor cleaner and 301,500 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion amount to $255,500.
FloorShine sells at $22 per 30-ounce bottle. The table cleaner can be sold for $17 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 301,500 ounces of another compound (TCP) to the 301,500 ounces of table cleaner. This joint process will yield 301,500 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $100,000. Both table products can be sold for $14 per 25-ounce bottle.
The company decided not to process the table cleaner into TSR and TP based on the following analysis.
| Process Further | ||||||||||||
| Table Cleaner |
Table Stain Remover (TSR) |
Table Polish (TP) |
Total | |||||||||
| Production in ounces | 301,500 | 301,500 | 301,500 | |||||||||
| Revenues | $205,020 | $168,840 | $168,840 | $337,680 | ||||||||
| Costs: | ||||||||||||
| CDG costs | 70,100 | * | 52,575 | 52,575 | 105,150 | ** | ||||||
| TCP costs | 0 | 50,000 | 50,000 | 100,000 | ||||||||
| Total costs | 70,100 | 102,575 | 102,575 | 205,150 | ||||||||
| Weekly gross profit | $134,920 | $66,265 | $66,265 | $132,530 | ||||||||
*If table cleaner is not processed further, it is allocated 1/3 of the $210,300 of CDG cost, which is equal to 1/3 of the total physical output.
**If table cleaner is processed further, total physical output is 1,206,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.
Determine if management made the correct decision to not process the table cleaner further by doing the following.
(1) Calculate the company’s total weekly gross profit assuming the table cleaner is not processed further.
Total weekly gross profit
(2) Calculate the company’s total weekly gross profit assuming the table cleaner is processed further.
Total weekly gross profit
(3) Compare the resulting net incomes and comment on management’s decision.
Management made the select a decision ____________ decision by choosing to not process table cleaner further.
Question 4
Cullumber Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $188,400 and the following divisional results.
| Division | |||||||||
| I | II | III | IV | ||||||
| Sales | $246,000 | $197,000 | $503,000 | $444,000 | |||||
| Cost of goods sold | 205,000 | 195,000 | 305,000 | 250,000 | |||||
| Selling and administrative expenses | 71,600 | 63,000 | 60,000 | 52,000 | |||||
| Income (loss) from operations | $ (30,600) | $ (61,000) | $138,000 | $142,000 | |||||
Analysis reveals the following percentages of variable costs in each division.
| I | II | III | IV | ||||||||||
| Cost of goods sold | 74 | % | 88 | % | 78 | % | 76 | % | |||||
| Selling and administrative expenses | 37 | 61 | 50 | 59 |
Discontinuance of any division would save 50% of the fixed costs and expenses for that division.
Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.
- a) Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
b1) Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
b2) Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
b3) What course of action do you recommend for each division?
Course: BUS-317 Financial Decision Making
School: Grand Canyon University
- 15/08/2021
- 150
