Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excesscapacity to make this order. A breakdown of the costs is as follows:Direct materials$2.00Direct labor0.50Variable factory overhead1.50Fixed factory overhead2.50Total cost per unit$6.50Should Piper Rose Boutique accept the special order made by the college?Proposal to Sell Polo Shirts to CollegeLine Item DescriptionAmountDifferential revenue from accepting offerDifferential variable costs of additional unitsDifferential income (loss) from accepting the offerThe order should be L

Differential revenue from accepting offerThis is calculated by multiplying the number of polos…

Answered: Piper Rose Boutique has been approached…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

See similar textbooks

Similar questions

Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Andalus Furniture Company has two manufacturing plants, one at Aynor and another at Spartanburg. The cost in dollars of producing a kitchen chair at each of the two plants is given here. The cost of producing Q1 chairs at Aynor is: 75Q1+5Q12+100 and the cost of producing Q2 kitchen chairs at Spartanburg is: 25Q2+2.5Q22+150. Andalus needs to manufacture a total of 40 kitchen chairs to meet an order just received. How many chairs should be made at Aynor, and how many should be made at Spartanburg in order to minimize total production cost?
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30.000 units of Shapes, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: The cost driver for each cost pool and its expected activity is shown: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing?
Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Use the information provided to create a standard cost card for production of one glove box switch. To make one switch it takes 16 feet of plastic-coated copper wire and 0.5 pounds of plastic material. The plastic material can usually be purchased for $20.00 per pound, and the wire costs $2.50 per foot. The labor necessary to assemble a switch consists of two types. The first type of labor is assembly, which takes 3.5 hours. These workers are paid $27.00 per hour. The second type of labor is finishing, which takes 2 hours. These workers are paid $29.00 per hour. Overhead is applied using labor hours. The variable overhead rate is $14.90 per labor hour. The fixed overhead rate is $15.60 per hour.
Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows: Direct materials. Direct labor Variable factory overhead $2.00 0.50 1.50 2.50 $6.50 Fixed factory overhead Total cost per unit Should Piper Rose Boutique accept the special order made by the college? Proposal to Sell Polo Shirts to College Differential revenue from accepting offer Differential variable costs of additional units Differential income (loss) from accepting the offer The order should be $
Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows: Line Item Description Costs Direct materials $2.00 Direct labor 0.50 Variable factory overhead 1.50 Fixed factory overhead 2.50 Total cost per unit $6.50 Should Piper Rose Boutique accept the special order made by the college? Question Content Area blankProposal to Sell Polo Shirts to Collegeblank Line Item Description Amount Differential revenue from accepting offer $Differential revenue from accepting offer Differential variable costs of additional units Differential variable costs of additional units Differential income (loss) from accepting the offer $Differential income (loss) from accepting the offer
Paper Roses Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for P6.00 each. The company normally sells its shirts for P12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows: Direct materials P2.00 Direct labor 0.50 Variable factory overhead 1.50 Fixed factory overhead _2.50 Total cost per unit P6.50 Should Paper Roses Boutique accept the special order made by the college? Show computations, but a formal differential analysis report is not required.
Snow Ride manufactures snowboards. Its cost of making 1,900 bindings is as follows: Direct materials $ 17,590 Direct laabor 3,200 Variable overhead 2,080 Fixed overhead 6,300 Total manufacturing cost for 1,900 bindings $ 29,170 Suppose Livingston will sell bindings to Snow Ride for $13 each. Snow Ride would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Requirments: 1. Snow Ride's accountants predict that purchasing the bindings from livingston will enable the company to avoid $2,100 of fixed overhead. Prepare an analysis to show whether Snow Ride should make or buy the bindings. 2. The facilities freed by purchasing bindings from…
The Park Avenue Corporation currently makes a part required in its finished product. The company uses 2,170 units of this part annually. Park Avenue Corp has been approached by a vendor to provide this part for $13.08 each. The following cost information is provided Direct Materials per unit $5.26 Direct Labor per unit $7.30 Variable Factory Overhead per unit $2.50 Fixed Factory Overhead per unit $7.50 How much would Park Avenue Corporation save by having the vendor make the part, instead of making it themselves? Enter your answer rounded to the nearest whole number. Don't enter dollar signs or commas.
Justine Corporation currently makes rolls for deli sandwiches it produces. It uses 40,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are given below: Materials $0.24 per roll Labor $0.40 per roll Variable overhead $0.16 per roll Fixed overhead $0.20 per roll A potential supplier has offered to sell Justine the rolls for $0.95 each. If the rolls are purchased, 20% of the fixed overhead could be avoided. If Justine accepts the offer, what will the effect on profit be? $4,400 increase in profit $1,200 increase in profit $3,300 increase in profit $3,300 decrease in profit $4,400 decrease in profit

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Essentials of Business Analytics (MindTap Course …

Statistics

ISBN:

9781305627734

Author:

Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Essentials of Business Analytics (MindTap Course …

Statistics

ISBN:

9781305627734

Author:

Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS