Allen Corporation currently makes the nylon convertible top for its main product, a fiberglassboat designed especially for water skiing. The costs of producing the 1,500 tops needed eachyear follow:Nylon fabric..Aluminum tubing.Frame fittings..$270,00096,00024,000Direct labor..162,000Variable manufacturing overhead.Fixed manufacturing overhead...30,000152,000Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops ofcomparable quality for $400 each, F.O.B. shipping point. Allen would furnish its own trademarkinsignia at a unit cost of $16. Transportation in would be $28 per unit, paid by Allen Corporation.Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixedoverhead could be avoided if the tops are purchased. The tops have been made in a remotesection of Allen's factory building, using equipment for which no alternate use is apparent in theforeseeable future.Requireda. Prepare a differential analysis showing whether or not you would recommend that theconvertible tops be purchased from Dustin Company.b. Assuming that the production capacity released by purchasing the tops could be devotedto a subcontracting job for another company that netted a contribution margin of$41,600, what maximum purchase price could Allen Corporation pay for the tops?c. Identify two important qualitative factors that Allen Corporation should consider indeciding whether to purchase the needed tops.

Qualitative factors are non-quantifiable decision results. The following are some examples of…

Answered: Allen Corporation currently makes the…

Allen Corporation currently makes the nylon convertible top for its m boat designed especially for water skiing. The costs of producing th year follow: Nylon fabric....

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Outdoor Luggage, Incorporated, makes high-end hard-sided luggage for sports equipment. Data concerning three of the company's most popular models appear below: Ski Guard Golf Guard Selling price per unit $ 310 Variable cost per unit $ 150 $ 330 $ 130 Fishing Gi $ 275 $ 85 Plastic injection molding machine processing time required to produce one unit Pounds of plastic pellets per unit 8 minutes 7 pounds 15 minutes 9 pounds 5 minu 10 poun Required: 1. If the total time available on the plastic injection molding machine is the constraint, how much contribution margin per minute of the constrained resource is earned by each product? 2. Which product offers the most profitable use of the plastic injection molding machine? 3. If a severe shortage of plastic pellets required the company to cut back production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product? 4.…
not graded please help Make or BuyAllen Corporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops needed each year follow: Nylon fabric $275,000 Aluminum tubing 96,000 Frame fittings 24,000 Direct labor 162,000 Variable manufacturing overhead 30,000 Fixed manufacturing overhead 152,000 Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable quality for $410 each, F.O.B. shipping point. Allen would furnish its own trademark insignia at a unit cost of $16. Transportation in would be $28 per unit, paid by Allen Corporation. Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead could be avoided if the tops are purchased. The tops have been made in a remote section of Allen's factory building, using equipment for which no alternate…
Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with tribological (i.e., low friction) properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below. Using a MARR of 15% year, which alternative has the lower present worth? per Method DDM LS First Cost $-200,000 $-40,000 $-500,000 M&O Cost, per Year $-40,000 Salvage Value Life $2,000 $21,000 2 years 4 years The present worth for the DDM method is $ The present worth for the LS method is $ The (Click to select) v method is selected.
Go Fly A Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $12.00 and the large kites would be $25.00 The variable cost per unit is $5.80 and $12.60, respectively. Jill, the owner, feels that she can sell 3,350 of the small kites and 1,925 of the large kites each year. The fixed costs would be $2,120 a year and the depreciation expense is $1,650. The tax rate is 34 percent. What is the annual operating cash flow? Multiple Choice $28,063 $15,018 O $31224 $28.624 $30,023
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A-2
How should I prepare a differential analysis showing whether or not I would recommend that the convertible tops be purchased from Dustin Company?
The Quality Athletics Company produces a wide variety of outdoor sports equipment. Its newest division, Golf Technology, manufactures and sells a single product: AccuDriver, a golf club that uses global positioning satellite technology to improve the accuracy of golfers' shots. The demand for AccuDriver is relatively insensitive to price changes. The following data are available for Golf TechnoloTotal annual fixed costs $30,000,000 Variable cost per AccuDriver $440 Number of AccuDrivers sold each year 155,000 Average operating assets invested in the division $ 50,000,0001. Compute Golf Technology's ROI if the selling price of AccuDrivers is $ 740 per club. 2. If management requires an ROI of at least 20% from the division, what is the minimum selling price that the Golf Technology Division should charge per AccuDriver club? 3. Assume that Quality Athletics judges the performance of its investment centres on the basis of RI rather than ROI. What is the minimum selling price that Golf…
The Tuff Wheels was getting ready to start its development project for a new product to be added to its small, motorized vehicle line for children. The new product is called the Kiddy Dozer. It will look like a miniature bulldozer, complete with caterpillar tracks and a blade. Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. The following table contains the relevant information for this project. Development cost $900,000; Estimated development time 9 months; Pilot testing $200,000; Ramp-up cost $400,000; Marketing and support cost $150,000 per year; Sales and production volume 60,000 per year; Unit production cost $100; Unit price $170; Interest rate 8% Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. Assume all cash flows occur at the end of each period. What is the net present value…
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We have been asked to analyze our denim jeans line by labor cost (from $13.00 to $16.00 by $0.25) and electricity costs (from 0.85 to 1.50 by 0.05). Fixed Cost = $184,000 Material cost per pair = $9.17 Revenue per pair = $29.99 Quantity = 27,500 If we are to be profitable, what must the electricity cost be if our labor cost is $13.25 per hour?