product at a price of $39 per unit. Bueno's current production and sales is as follows: Units produced & sold annually 10,000 Unit production capacity 14,000 Per unit Regular sales price $ 55.00 Direct Materials 20.00 Direct Labor 10.00 Variable Overhead 6.00 Fixed Overhead 2.00 a. What is the short- term change in Operating Income if Chido's special offer is accepted? b. Suppose that Bueno is operating at full capacity producing and selling 14,000 units per year. What is the Opportunity Cost if Chido's special offer is accepted? c. What non-financial factors should Bueno consider in deciding whether to accept/reject Chido's offer?

product at a price of $39 per unit. Bueno's current production and sales is as follows: Units produced & sold annually 10,000 Unit production capacity 14,000 Per unit Regular sales price $ 55.00 Direct Materials 20.00 Direct Labor 10.00 Variable Overhead 6.00 Fixed Overhead 2.00 a. What is the short- term change in Operating Income if Chido's special offer is accepted? b. Suppose that Bueno is operating at full capacity producing and selling 14,000 units per year. What is the Opportunity Cost if Chido's special offer is accepted? c. What non-financial factors should Bueno consider in deciding whether to accept/reject Chido's offer?

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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Division X makes a part with the following characteristics: Production capacity.. 25,000 units $18 Selling price to outside customers. Variable cost per unit. $11 Fixed cost, total. $100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $17 per unit, the company as a whole will be: Select one: a. better off by $10,000 each period. b. worse off by $20,000 each period. C. worse off by $10,000 each period. d. There will be no change in the status of the company as a whole.
Amarjit Truckers, Ltd. operates a fleet of delivery trucks in North America. The company has determined that, if a truck is driven 120,000 kilometres during a year, the average operating cost is 18.000 cents per kilometre. If a truck is driven only 50,000 kilometres during a year, the average operating cost increases to 21.0 cents per kilometre. Required: 1. Using the high - low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 2. Express the variable and fixed costs in the form Y = a + bX. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 3. If a truck were driven 80,000 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round "Total annual cost" to 2 decimal places.)