Diamond Boot Factory normally sells its specialty boots for $25 a pair. An offer to buy 80 boots for $17 per pair was made by an organization hosting anational event in Norfolk. The variable cost per boot is $9, and special stitching will add another $3 per pair to the cost.Determine the differential income or loss per pair of boots from selling to the organization.Income$Should Diamond Boot Factory accept or reject the special offer?Accept the special offer.

In special order decision question, offer price is compared with the the relevant cost. relevant…

Answered: Diamond Boot Factory normally sells its…

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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Diamond Boot Factory normally sells its specialty boots for $23 a pair. An offer to buy 105 boots for $16 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $8, and special stitching will add another $3 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization.$ Should Diamond Boot Factory accept or reject the special offer?
Rainbow Paints operates a chain of retail paint stores. Although the paint is sold under the Rainbow label, it is purchased from an independent paint manufacturer. Guy Walker, president of Rainbow Paints, is studying the advisability of opening another store. His estimates of monthly costs for the proposed location are as follows: Fixed costs: Occupancy costs Salaries Other Variable costs (including cost of paint) $6 per gallon Although Rainbow stores sell several different types of paint, monthly sales revenue consistently averages $10 per gallon sold. Required: a. Compute the contribution margin ratio and the break-even point in dollar sales and in gallons sold for the proposed store. c. Walker thinks that the proposed store will sell between 2,200 and 2,600 gallons of paint per month. Compute the amount of operating income that would be earned per month at each of these sales volumes. a. Contribution margin ratio a. Break-even sales volume in dollars a. Break-even sales volume in…
Leo Consulting enters into a contract with Highgate University to restructure Highgate's processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $80,000 and earn an additional $16,000 if Highgate achieves $160,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $160,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract
displaying at a craft fair, a representative of a mail order catalog company wants to put your product in the catalog. It will pay you $40 and mark up the product to $55 for the catalog. It estimates that your market share could be substantial and should be dependent only on your production output. You decide to quit your real job and devote all your time to making wreaths, but you want to match your current $50,000 salary. You really don’t want to work more than 40 hours per week in actual wreath manufacturing (assume all paperwork, material purchasing, and such takes place beyond those 40 hours). You want four weeks a year for vacation, holidays, and sick days or personal days. Taking into consideration time constraints, the price you will get from the catalog company, and your revised costs, does this make sense? Assume each wreath has $5 costs and takes one hour to construct.
a) Using incremental analysis, determine if the component should be purchased from the outside supplier? Would your decision in part a) change if the company has the opportunity to rent out its facilities that it currently uses to manufacture the component for $5,500 ? Show full computations Why “Opportunity Costs” are not recorded in the financial books but are considered a relevant cost.
Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28 per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correct decision using the sell or process further decision rule and why? Process further because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $28 per unit. O Process further because profits will be greater by $5 per unit. eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer
Peru Company, which manufactures sneakers, has enough capacity available to accept a special order of 20,000 pairs of sneakers at Ph 6.00 a pair. The normal selling price is Ph 10.00 a pair. Variable manufacturing costs are Ph 4.50 a pair, and fixed manufacturing costs are Ph 1.50 a pair. Peru will not incur any selling expenses as a result of the special order. What could be the effect on operating income if the special order could be accepted without affecting normal sales? O Ph 0 Ph 30,000 increase Ph 90,000 increase O Ph 120,000 increase
A company inadvertently produced 3,000 defective MP3 players. The players cost $12 each to produce. A recycler offers to purchase the defective players as they are for $8 each. The production manager reports that the defects can be corrected for $10 each, enabling them to be sold at their regular market price of $19 each. The company should a. Correct the defect and sell them at the regular price. b. Sell the players to the recycler for $8 each. c. Sell 2,000 to the recycler and repair the rest. d. Sell 1,000 to the recycler and repair the rest. e. Throw the players away.
Snow Now sells snowboards. Snow Now knows that the most people will pay for the snowboards is $129.99. Snow Now is convinced that it needs a 45% markup based on cost. The most that Snow Now can pay to its supplier for the snowboards is: A. $88.65 B. $98.65 C. $96.65 D. None of these E. $87.65
* Your answer is incorrect. Crane Company sells 302 units of its products for $20 each to John Inc. for cash. Crane allows John to return any unused product within 30 days and receive a full refund. The cost of each product is $13. To determine the transaction price, Crane decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Crane estimates that (1) 9 products will be returned and (2) the returned products are expected to be resold at a profit. (a) Indicate the amount of net sales. Net sales $ (b) Indicate the amount of estimated liability for refunds. Liability for refunds $ Cost of goods sold 5869 (c) Indicate the amount of cost of goods sold that Crane should report in its financial statements Lassume that none of the products fave been returned at the financial statement date) 5 eTextbook and Media 171 Q Search 3913 (7
Making outsourcing decisions Cold Sports manufactures snowboards. Its cost of making 2,000 bindings is as follows: Suppose Topnotch will sell bindings to Cold Sports for $15 each. Cold Sports 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. Requirements Cold Sports’s accountants predict that purchasing the bindings from Topnotch will enable the company to avoid $2,300 of fixed overhead. Prepare an analysis to show whether Cold Sports should make or buy the bindings. The facilities freed by purchasing bindings from Topnotch can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Cold Sports had produced the bindings. Show which alternative makes the best use of Cold Sports’s facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
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