Munoz Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Munoz's normal sales territory, asks Munoz to pour 45 slabs for Lancing's new development of homes. Munoz has the capacity to build 490 slabs and is presently working on 140 of them. Lancing is willing to pay only $2,650 per slab. Munoz estimates the cost of a typical job to include unit-level materials, $830; unit-level labor, $580; and an allocated portion of facility-level overhead, $1,300. Required Calculate the contribution to profit from the special order. Should Munoz accept or reject the special order to pour 45 slabs for $2,650 each? Contribution to profit Should Munoz accept or reject the special order?

Munoz Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Munoz's normal sales territory, asks Munoz to pour 45 slabs for Lancing's new development of homes. Munoz has the capacity to build 490 slabs and is presently working on 140 of them. Lancing is willing to pay only $2,650 per slab. Munoz estimates the cost of a typical job to include unit-level materials, $830; unit-level labor, $580; and an allocated portion of facility-level overhead, $1,300. Required Calculate the contribution to profit from the special order. Should Munoz accept or reject the special order to pour 45 slabs for $2,650 each? Contribution to profit Should Munoz accept or reject the special order?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A machine part is manufactured at a unit cost of 40¢ for material and 15¢ for direct labor. An investment of $500,000 in tooling is required. The order calls for 3 million pieces. Halfway through the order, managers learn that a new method of manufacture can be put into effect that will reduce the unit costs to 34¢ for material and 10¢ for direct labor—but it will require $100,000 for additional tooling. This tooling will not be useful for future orders. Other costs are allocated at 2.5 times the direct labor cost. What, if anything, should be done?
Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs. A. Lumber used to construct decks ($12.00 per square foot) B. Carpenter labor used to construct decks ($10 per hour) C. Construction supervisor salary ($45,000 per year) D. Depreciation on tools and equipment ($6,000 per year) E. Selling and administrative expenses ($35,000 per year) F. Rent on corporate office space ($34,000 per year) G. Nails, glue, and other materials required to construct deck (varies per job)
Old Camp Company manufactures awnings for its own line of tents. The company currently is operating at capacity and received an offer from one of its suppliers to make the 11,000 awnings it needs for $20 each. Old Camp’s costs for making the awning are $7 in direct materials and $6 in direct labor. Variable manufacturing overhead is 75 percent of direct labor. If Old Camp accepts the offer, $37,000 of fixed manufacturing overhead currently being charged to the awnings will have to be absorbed by other product lines. Required: Complete the incremental analysis for the decision to make or buy the awnings in the table provided below. Should Old Camp continue to manufacture the awnings, or should it purchase the awnings from the supplier? Assuming the capacity released by purchasing the awnings allowed Old Camp to record a profit of $35,000, should Old Camp continue to manufacture or purchase the awnings?
Old Camp Company manufactures awnings for its own line of tents. The company is currently operating at capacity and has received an offer from one of its suppliers to make the 10,000 awnings it needs for $18 each. Old Camp’s costs to make the awning are $7 in direct materials and $5 in direct labor. Variable manufacturing overhead is 80 percent of direct labor. If Old Camp accepts the offer, $32,000 of fixed manufacturing overhead currently being charged to the awnings will have to be absorbed by other product lines.Required:1. Complete the incremental analysis for the decision to make or buy the awnings in the table provided below. Make Buy Net Income Increase (Decrease) Direct Materials Direct Labor Variable OH Fixed OH Purchase Price Total 2. Should Old Camp continue to manufacture the awnings or should they purchase the awnings from the supplier?3. Assuming that the capacity released by purchasing the awnings…
Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 286,000 522,500 32,400 $ 840,900 Total order value (before delivery charge) Number of orders The intern selected two customers, who were frequent customers, to use as an illustration of…
Haver Company currently pays an outside supplier $15 per unit for a part for one of its products. Haver is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $5 per unit, direct labor of $8 per unit, and ncremental overhead of $3 per unit. Method 2 for making the part would require direct materials of $5 per unit, direct labor of $2 per unit, and incremental overhead of $7 per unit. Required: 1. Compute the cost per unit for each alternative method of making the part. 2. Should Haver make or buy the part? If Haver makes the part, which production method should it use? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the cost per unit for each alternative method of making the part. Make with Method Make with 1 Method 2 Cost per unit Cost per unit Required t Buy Required 2 >
Isaacson's Fine Furnishings manufactures upscale custom furniture. Isaacson's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,170,000 of manufacturing overhead to individual jobs. However, Delores Johnson, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $735,000 of manufacturing overhead while the Finishing Department incurs $435,000 of manufacturing overhead. Johnson has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department The Isaacson's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 7 DL hours throughout the entire production process. Job 450 incurred 1 MH in the Machining Department and 6 DL hours in the Finishing Department (the other DL hour occurred in the Machining…
Bird’s Eye View manufactures satellite dishes used in residential and commercial installations for satellite-broadcasted television. For each unit, the following costs apply: $50 for direct material, $100 for direct labor, and $60 for variable overhead. The company’s annual fixed overhead cost is $1,800,000; it uses expected capacity of 30,000 units produced as the basis for applying fixed overhead to products. A commission of 10 percent of the selling price is paid on each unit sold. Annual fixed selling and administrative expenses are $432,000. The following additional information is available: Year 1 Year2 Selling price per unit $500 $500 Number of units sold 24,000 28,800 Number of units produced 30,000 26,400 Beginning inventory (units) 18,000 24,000 Ending inventory (units) 24,000 ? a. Prepare pre-tax income statements under absorption and variable costing for Year 1 and Year 2, with any volume variance being charged to Cost of Goods Sold.
Zachary Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Zachary's normal sales territory, asks Zachary to pour 53 slabs for Lancing's new development of homes. Zachary has the capacity to build 370 slabs and is presently working on 230 of them. Lancing is willing to pay only $2,630 per slab. Zachary estimates the cost of a typical job to include unit-level materials, $820; unit-level labor, $400; and an allocated portion of facility-level overhead, $1,490. Required Calculate the contribution to profit from the special order. Should Zachary accept or reject the special order to pour 53 slabs for $2,630 each? Contribution to profit Should Zachary accept or reject the special order?
A cement company produces preformed concrete blocks that requires three (3) hours of machine time. Machine hours are a scarce resource as a result of the productive capacity of the machines. The company has 70 machines. Each machine works 7 hours per day. The factory operates five (5) days per week and 50 weeks annually. The company sells each unit of this product for $360 and the product uses direct material costing $60 per unit. The total factory operating cost includes direct labour and production overheads. The average direct labour hour rate is $25 per hour. The company has 95 employees during the period who actually worked 8 hours per day. Overheads are absorbed using direct labour hours. The budgeted overheads for the period are $3,500,000. While the budgeted direct labour hours were 100,000 hours. Required: (a) Calculate the return per factory hour. (b) Calculate the cost per factory hour. (c) Calculate the TPAR.
Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Cost Driver Annual Cost Annual Driver Volume Picking order Number of items $ 330,750 367,500 items Delivering order Number of orders 942,500 32,500 orders Handling complaints Number of complaints 32,500 125 complaints Total delivery cost $ 1,305,750 The intern selected two customers, who were frequent customers,…
Tim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 x 50 equals the total rooms rented for the year). Tim's cost to clean a room is $13.00. The Duffy's Maid Service quote is $18.00 per room plus a fixed cost of $26,000 for sundry items such as uniforms with the motel's name. Tim's annual fixed cost for space, equipment, and supplies is $61,000. Based on the given information related to costs for each of the options, the crossover point for Tim = ☐ room nights (round your response to the nearest whole number).