Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,600 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $36 each; they cost $39 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total Per Unit Unit Cost $16 9 3 11 $39 Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $39 each when it can buy them for $36 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Total $ 121,600 68,400 22,800 83,600 $ 296,400

Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,600 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $36 each; they cost $39 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total Per Unit Unit Cost $16 9 3 11 $39 Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $39 each when it can buy them for $36 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Total $ 121,600 68,400 22,800 83,600 $ 296,400

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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Ch. 7 Incremental Analysis pg 467 Segment Income Statement Please provide the answer and explain the answer to the following question with the information given below. "Big Tent Company is trying to decide whether to keep or drop one of its outdoor wedding tents. The company's segmented income statement shows that this product is generating a net loss as follows:" Sales Revenue: $100,000 Less: Variable Costs $70,000 Contribution Margin $30,000 Less: Direct Fixed Costs $10,000 Segment Margin $20,000 Less: Allocated common fixed costs $30,000 Net Operating Income $(10,000) The company estimates that eliminating this product line will increase the contribution margin on a related product line by $25,000. Based on this information, what impact would dropping the line have on the company's overall profitability?
Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 120 20,300 14,500 5,800 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $300 in additional variable cost per instrument and then sold the instruments for $690 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,300 circuit boards. Next year, Division B wants…
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