Ch6_in-class_Exercises (1)

Exercise 6-2 The Regal Cycle Company manufactures three types of bicycles – a dirt bike, a mountain bike, and a ra Mountain Bikes Total Dirt Bikes Revenues $300,000 $90,000 $150,000 Variable manufacturing and selling exp. 120,000 27,000 60,000 Contribution margin 180,000 63,000 90,000 Fixed expenses: Advertising, traceable 30,000 10,000 14,000 Depreciation of special equipment 23,000 6,000 9,000 Salaries of product-line managers 35,000 12,000 13,000 60,000 18,000 30,000 Total fixed expenses 148,000 46,000 66,000 Net operating income (loss) $32,000 $17,000 $24,000 * Allocated on the basis of sales dollars. Required: Differential Approach Contribution Margin Advertising savings Product line manager's salary Profit (Loss) from Eliminating Segment Total Approach Racing Bikes Revenues $300,000 $60,000 Variable manufacturing and selling exp. 120,000 33,000 Contribution margin 180,000 27,000 Fixed expenses: Advertising, traceable 30,000 6,000 Depreciation of special equipment 23,000 8,000 Salaries of product-line managers 35,000 10,000 60,000 12,000 Total fixed expenses 148,000 36,000 Allocated common fixed expenses * Management is concerned about the continued losses shown by the racing bikes and wants a recomm special equipment used to produce racing bikes has no resale value and does not wear out. 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Sho differential approach and the total approach. Total Currently Total w/o Racing Bikes Allocated common fixed expenses *

ment in assessing the long-run profitability of the various product lines. Racing Bikes

Depreciation 60000 s produced all of the necessary parts for to Troy Engines, Ltd., for a cost of $35 per ost of producing the carburetor internally: rburetors, what would be the financial unch a new product. The segment margin advantage (disadvantage) of buying

ays that the unit lets for the to the bracelets that s cost per bracelet by g overhead is fixed overhead is variable ould have no effect wedding party’s order

(per unit): C #DIV/0! #DIV/0! ? Third? its 5,000 pounds of material? 5000 Raw Materials 5,000 5,000 - n each product. The material costs $3 per

Chapter 6 Foundational 15 #1-4, 6-15 Sales Price 100,000 units $ 120 Fixed or Variable? Alpha Alpha CM/unit Direct materials $30 Direct labor 20 Variable manufacturing overhead 7 Traceable fixed manufacturing overhead 16 Variable selling expenses 12 Common fixed expenses 15 Total cost per unit $100 CM/unit $ 120 Required: (Answer each question independently unless instructed otherwise) 1.What is the total amount of traceable fixed manufacturing overhead for each of the two products? Formula: Alpha Beta 2.What is the company’s total amount of common fixed expenses? Formula: Alpha Beta Differential Approach Reject Accept Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respective pound. The company has the capacity to annually produce 100,000 units of each product. Its average c The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its commo products based on sales dollars. 3. Assume that Cane’s expects to produce and sell 80,000 Alphas during the current year. One of Can buy 10,000 additional Alphas for a price of $80 per unit. What is the financial advantage (disadvantage)

14.If Cane follows your recommendation in requirement 13, what total contribution margin will it earn? Formula: Alphas Betas 15.If Cane uses its 160,000 pounds of raw materials as you recommended in requirement 13, up to how Formula:

100,000 uni $ 80 Beta Beta CM/unit $12 15 5 18 8 10 $68 $ 80 ely. Each product uses only one type of raw material that costs $6 per cost per unit for each product at this level of activity are given below: on fixed expenses are unavoidable and have been allocated to ne’s sales representatives has found a new customer who is willing to ) of accepting the new customer’s order?

e (disadvantage) of discontinuing the Beta product line? e (disadvantage) of discontinuing the Beta product line? e’s sales representatives has found a new customer who is willing to of accepting the new customer’s order? iscontinues the Beta product line, its sales representatives could g the Beta product line?

B #DIV/0! B #DIV/0! - - as offered to manufacture and deliver 80,000 Alphas to Cane for a upplier instead of making those units? as offered to manufacture and deliver 50,000 Alphas to Cane for a upplier instead of making those units? Beta. Also assume that the raw material oduce to maximize its profits?

? w much should it be willing to pay per pound for additional raw materials?