The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolledaluminum can be sold for $2,500 per ton, and ingot can be sold without further processing for $1,250 per ton. Ingot is produced in batches of82 tons by smelting 500 tons of bauxite, which costs $102 per ton of bauxite. Rolled aluminum will require additional processing costs of $610per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum.Required:1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolledaluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus sign to indicate a loss.Differential AnalysisSell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2)February 5Line Item DescriptionSell Ingot(Alternative 1)Process Furtherinto Rolled Aluminum(Alternative 2)Differential Effects(Alternative 2)Revenues, per batchCosts, per batchProfit (loss), per batch2. International Aluminum Co.beprocess aluminum ingot further, rather than sell aluminum ingot because profits would

Incremental Analysis :— This analysis shows the comparison between two different alternatives. A…

Answered: The management of International…

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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Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit. Required: Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain. An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations. How do your answers in parts (a) and (b) relate to the theory of constraints? Explain.
Differential Analysis for Further Processing The management of International Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $2,300 per ton, and ingot can be sold without further processing for $1,150 per ton. Ingot is produced in batches of 90 tons by smelting 540 tons of bauxite, which costs $103 per ton of bauxite. Rolled aluminum will require additional processing costs of $610 per ton of ingot, and 1.25 tons of ingot will produce 1 ton of rolled aluminum. Required: Question Content Area 1. Prepare a differential analysis as of February 5 to determine whether to sell aluminum ingot (Alternative 1) or process further into rolled aluminum (Alternative 2). If required, do not round interim calculations. If required, use a minus sign to indicate a loss. Differential AnalysisSell Ingot (Alt. 1) or Process Further into Rolled Aluminum (Alt. 2)February 5 Sell Ingot (Alternative 1) ProcessFurther…
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Adams for $2.80 each.Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
Po.36.
Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why? a.make, $244,000 increase in profits b.buy, $164,090 more in profits c.buy, $80,000 more in profits d.make, $164,090 increase in profits
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A distributor of fasteners is opening a new plant and considering whether to use a mechanized process or a manual process to package the product. The manual process will have a fixed cost of $36,234 and a variable cost of $2.14 per bag. The mechanized process would have a fixed cost of $84,420 and a variable cost of $1.85 per bag. The company expects to sell each bag of fasteners for $2.75. a) What is the break-even point for the manual process (in units)? b) What is the break-even point for the mechanized process (in units)? c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: 1) Use equations to set profit of manual process equal to mechanized process and solve for quantity; 2) (Excel) If you have a break-even for each process - have only one cell that represents quantity that be used to calculates costs/revenues for each process and use Goal…
Birkenstock is considering adding a new Big Buckle sandal to its current product offerings. Birkenstock expects to price the shoes at $125 per pair. The variable costs to produce one pair are estimated to be: $20 per pair direct materials; $25 per pair direct labor; $5 per pair shipping costs and $5 per pair miscellaneous overhead. The fixed costs for this line of shoes are: $50,000 advertising/promotion; $125,000 manufacturing plant manager salary; $350,000 depreciation expense on manufacturing equipment; and $50,000 other miscellaneous fixed costs. • Birkenstock's best guess is that they will sell 12,000 pairs of Big Buckle sandals in 2021. What is Birkenstock's expected 2021 profit on this product? Type your answer in the first blank below.
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Campbell Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,900 6,400 4,100 9,600 26,600 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Campbell for $2.80 each. Required a. Calculate the total relevant cost. Should Campbell continue to make the containers? b. Campbell could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate the total avoidable costs. Should Campbell continue to make the containers? a. Total relevant cost Should Campbell continue to make the containers? b. Total avoidable cost Should Campbell continue to make the containers?
Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $33 per unit; direct labor, $12 per unit; and variable factory overhead, $15 per unit. Fixed costs for the plant would increase by $90,000. Which option should be selected and why? Oa. a. buy, $90,000 increase in profits Ob. make, $80,940 increase in profits c. make, $171,000 increase in profits Od. buy, $80,940 increase in profits

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