Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $26, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? Primo Industries collected $105,000 from customers in 2014. Of the amount collected, $25.000 was from services performed in 2013. In addition, Primo performed services worth $40,000 in 2014, which will not be collected until 2015. Primo Industries also paid $72,000 for expenses in 2014. Of the amount paid, $30,000 was for expenses incurred on account in 2013. In addition, Primo incurred $42,000 of expenses in 2014, which will not be paid until 2015. a. Compute 2014 cash-basis net income. b. Compute 2014 accrual-basis net income.

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Author:OpenStax
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Chapter10: Short-term Decision Making
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Piper Corp. is operating at 70% of capacity and is currently purchasing
a part used in its manufacturing operations for $24 per unit. The unit
cost for the business to make the part is $36, including fixed costs, and
$26, not including fixed costs.
If 15,000 units of the part are normally purchased during the year but
could be manufactured using unused capacity, what would be the
amount of differential cost increase or decrease from making the part
rather than purchasing it?
Primo Industries collected $105,000 from customers in 2014. Of the
amount collected, $25.000 was from services performed in 2013. In
addition, Primo performed services worth $40,000 in 2014, which will
not be collected until 2015.
Primo Industries also paid $72,000 for expenses in 2014. Of the
amount paid, $30,000 was for expenses incurred on account in 2013.
In addition, Primo incurred $42,000 of expenses in 2014, which will not
be paid until 2015.
a. Compute 2014 cash-basis net income.
b. Compute 2014 accrual-basis net income.
Transcribed Image Text:Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $26, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? Primo Industries collected $105,000 from customers in 2014. Of the amount collected, $25.000 was from services performed in 2013. In addition, Primo performed services worth $40,000 in 2014, which will not be collected until 2015. Primo Industries also paid $72,000 for expenses in 2014. Of the amount paid, $30,000 was for expenses incurred on account in 2013. In addition, Primo incurred $42,000 of expenses in 2014, which will not be paid until 2015. a. Compute 2014 cash-basis net income. b. Compute 2014 accrual-basis net income.
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