Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of theunassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correctdecision using the sell or process further decision rule and why?Process further because profits will be greater by $33 per unit.Sell before assembly because profits will be greater by $33 per unit.Sell before assembly because profits will be greater by $28 per unit.O Process further because profits will be greater by $5 per unit.eTextbook and MediaSave for LaterAttempts: 2 of 3 usedSubmit Answer

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

Answered: Vaughn Manufacturing is starting…

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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Walton Corporation is currently selling 104 units of its product. The company is deciding the price that it should charge for a bulk order of 40 units. The variable cost per unit is $200. This order will not involve any additional fixed costs and the company's current sales will not be affected. The company targets a profit of $4,000 on the bulk order. What selling price per unit should the company quote for the bulk order?
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Pine Street Inc. makes unfinished bookcases that it sells for $57. Production costs are $38 variable and $10 fixed. Because it has unused capacity. Pine Street is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $8 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Sales price per unit Cost per unit Variable Fixed Total Net income per unit $ The bookcases Sell Process Further Net Income Increase (Decrease)
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Novak Inc. makes unfinished bookcases that it sells for $60. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Novak is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $9 per unit with no increase in fixed costs. Prepare an analysis on a per-unit basis that shows whether Novak should sell unfinished or finished bookcases. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Net Income Sell Process Further Increase (Decrease) $ $ $ Sales per unit Variable cost per unit Fixed cost per unit Total per unit cost $ Net income per unit The bookcases processed further. $ $
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Cullumber Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Cullumber Street is considering finishing the bookcases and selling them for $71. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Cullumber Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45).) Sales price per unit $ Cost per unit Variable Fixed Total Sell Process Further $ $ Net Income Increase (Decrease) Net income per unit SUPPORT $ $ $
Required:(a) GEM has an opportunity to sell 10 000 units to an overseas customer. Import duties and other special costs associated with this order would total $42 000. The only selling costs that would be associated with the order would be a shipping cost of $9.00 per unit. What would be the minimum acceptable unit price for GEM to consider this order? (hint: GEM would not accept the order if it would reduce the company’s profit) (b) The company has 200 units of Flicks on hand that were produced two months ago. Due to blemishes on the units, it will be impossible to sell these units at the normal price. If the company wishes to sell them through regular sales channels, what would be the relevant cost for setting the minimum price? Explain. (c) “All future costs are relevant in decision making.” Do you agree? Explain.
Making outsourcing decisions Cold Sports manufactures snowboards. Its cost of making 2,000 bindings is as follows: Suppose Topnotch will sell bindings to Cold Sports for $15 each. Cold Sports would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Requirements Cold Sports’s accountants predict that purchasing the bindings from Topnotch will enable the company to avoid $2,300 of fixed overhead. Prepare an analysis to show whether Cold Sports should make or buy the bindings. The facilities freed by purchasing bindings from Topnotch can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Cold Sports had produced the bindings. Show which alternative makes the best use of Cold Sports’s facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be $9 per unit, and the contribution margin of the next best alternative of the facility to be $5 per unit, then if Chade has: a. Full capacity, the company will be profitable at $4 per unit. b. Excess capacity, the company will be profitable at $6 per unit. c. Full capacity, the selling price must be greater than $5 per unit. d. Excess capacity, the selling price must be greater than $9 per unit

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