Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 11, Problem 5DQ
To determine
Explain the circumstances reasonable to purchase from the supplier.
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Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which will affect the actual cost of asset being sold for the buyer and the seller.
Consider this case:
Green Moose Industries buys most of its raw materials from a single supplier. This supplier sells to Green Moose on terms of 1/10, net 30.
The cost per period of the trade credit extended to Green Moose is ________(1.23%, 0.89%, 1.01%, 1.05%) (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.).
Green Moose’s trade credit has a nominal annual cost of _______ (22.85%, 19.17%, 16.59%, 18.43%) , assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.)
If Green Moose Industries’s supplier shortens its discount period to five days, this will _______ (Increase, Decrease) the cost of the trade credit.
How much of the transaction price would the company allocate to its performance obligation to provide the needed services to the customer?provide in good accounting form
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Explain the meaning of (A) differential revenue,...Ch. 11 - A company could sell a building for 250,000 or...Ch. 11 - A chemical company has a commodity-grade and...Ch. 11 - A company accepts incremental business at a...Ch. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Although the cost-plus approach to product pricing...Ch. 11 - How does the target cost method differ from...Ch. 11 - Prob. 10DQ
Ch. 11 - Lease or sell Plymouth Company owns equipment with...Ch. 11 - Prob. 2BECh. 11 - Make or buy A company manufactures various-sized...Ch. 11 - Replace equipment A machine with a book value of...Ch. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Differential analysis for a lease or sell decision...Ch. 11 - Prob. 2ECh. 11 - Differential analysis for a discontinued product A...Ch. 11 - Differential analysis for a discontinued product...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Make-or-buy decision Somerset Computer Company has...Ch. 11 - Prob. 8ECh. 11 - Machine replacement decision A company is...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Sell or process further Calgary Lumber Company...Ch. 11 - Sell or process further Dakota Coffee Company...Ch. 11 - Prob. 13ECh. 11 - Accepting business at a special price Box Elder...Ch. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Product cost method of product costing Smart...Ch. 11 - Target costing Toyota Motor Corporation (TM) uses...Ch. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Total cost method of product pricing Based on the...Ch. 11 - Variable cost method of product pricing Based on...Ch. 11 - Differential analysis involving opportunity costs...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Differential analysis for sales promotion proposal...Ch. 11 - Prob. 4PACh. 11 - Product pricing and profit analysis with...Ch. 11 - Product pricing using the cost-plus approach...Ch. 11 - Prob. 1PBCh. 11 - Differential analysis for machine replacement...Ch. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Analyze Pacific Airways Pacific Airways provides...Ch. 11 - Service yield pricing and differential equations...Ch. 11 - Prob. 3MADCh. 11 - Prob. 4MADCh. 11 - Aaron McKinney is a cost accountant for Majik...Ch. 11 - Prob. 3TIFCh. 11 - Decision on accepting additional business A...Ch. 11 - Accepting service business at a special price If...Ch. 11 - Identifying product cost distortion Peachtree...Ch. 11 - Prob. 1CMACh. 11 - Prob. 2CMACh. 11 - Aril Industries is a multiproduct company that...Ch. 11 - Oakes Inc. manufactured 40,000 gallons of Mononate...
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- A company enters into a contract to sell 50 products to a customer for $30 each. After the company transfers 30 of the 50 products, the customer wants an additional 25 products. The contract is modified and the additional 25 products are priced at $15 each, a price that is not reflective of the standalone selling price. What is the price per product for the remaining 45 products (20 products from the original contract and 25 products from the modification)? $30 for the remaining 20 products from the original contract and $15 for the additional 25 products from the modification. $22.50, the blended price for the remaining products. $21.67, the blended price for the products from the original contract and the modification. O $15, the price for the products specified in the contract modification.arrow_forwardAn full-service technology company provides equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. A Customer purchased computer equipment, installation and training for a total cost of P150,000 on May 22, 2021. Estimated stand alone selling price of the equipment, training and installation are P100,000, P90,000 and P60,000 respectively. How much is the transaction price allocated to the installation?arrow_forwardLuke consulting enters into a contract with Holand University to restructure Holand's process for purchasing goods from suppliers. The contract states that Luke will earn a fixed fee of P25,000and earn an additional P10,000 if Holand achieves P10,000 of cost savings. Luke determines the transaction price as the expected value of expected consideration, what transsaction price will Luke estimate for this contract?arrow_forward
- Cost of trade credit Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit. These terms will affect the cost of the asset for both the buyer and the seller. Consider the following case: Blue Elk Manufacturing buys most of its raw materials from a single supplier. This supplier sells to Blue Elk on terms of 2/15, net 45. The cost per period of the trade credit extended to Blue Elk, rounded to two decimal places, is___________% Blue Elk’s trade credit has a nominal annual cost—expressed as an annual percentage rate (APR)—of_________%, assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) If Blue Elk’s supplier shortens the discount period by five days, this will _____________(Increase or decrease pick one) the cost of the trade credit.arrow_forwardLockrite Security Company manufacturers home alarms. Currently, it is manufacturing one of its components at a total cost of $40, which includes fixed costs of $13 per unit. An outside provider of this component has offered to sell Lockrite the component for $29. Provide a differential analysis of the outside purchase proposal. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Component (Alternative 1) or Buy Component (Alternative 2) MakeComponent(Alternative 1) BuyComponent(Alternative 2) DifferentialEffects(Alternative 2) Unit costs: Purchase price Variable costs Fixed costs Total unit costs $arrow_forwardOne Corporation has two potential suppliers. Both are supplying the items at similar list prices and trade,discounts. However, Supplier A.offered a credit term of 2/10, n/30 and the other offered a term of 3/10, n/40. Which of the following statements is true? a. Alpha should choose Supplier A and pay on the 10th day.b. Alpha should choose Supplier B and pay on the 10th day.c. Alpha can choose either supplier and always pay on the 10th day.d. If Alpha chose Supplier B, the former should pay on the 30th day so that it can maximize the trade discountarrow_forward
- A product and service are bundled together and sold to customers for $450. The fair values of the product and service are $350 and $150 respectively. Under the residual method, how much would be allocated to the product?arrow_forwardA company manufactures a subcomponent of an assembly for $80 per unit, including fixed costs of $25 per unit. A proposal is offered to purchase the subcomponent from an outside source for $60 per unit, plus $5 per unit freight. Prepare a differential analysis to determine whether the company should make (Alternative 1) or buy (Alternative 2) the subcomponent, assuming fixed costs are unaffected by the decision.arrow_forwardKando Company incurs a $11.00 per unit cost for Product A, which it currently manufactures and sells for $18.50 per unit. Instead of manufacturing and selling this product, the company can purchase it for $4.00 per unit and sell it for $16.00 per unit. If it does so, unit sales would remain unchanged and $4.00 of the $11.00 per unit costs of Product A would be eliminated. 1. Prepare Incremental cost analysis. Should the company continue to manufacture Product A or purchase it for resale? (Round your answers to 2 decimal places.) Selling price per unit Cost per unit to make Cost per unit to buy Cost per unit not eliminated if bought Income per unit Company should: Make Buyarrow_forward
- ABC Co. sells Product X, Product Y, and Product Z to a customer for a lump sum price of P90,000. The products will be delivered at a different point in time. ABC Co. regularly sells products X, Y and Z separately at P20,000, P40,000 and P60,000, respectively. How much is the allocated transaction price of Product Z?arrow_forwardHow many performance obligation/s are there? Enumerate. Bartle Company signed a contract charging a customer P60,000 to change the windows of a customer's house. The contract includes costs for materials and labor. Bartle would charge P25,000 for materials if sold separately and P50,000 for labor if the customer will purchase the needed materials.arrow_forwardLeo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $25,000 and earn an additional $10,000 if Highgate achieves $100,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $100,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract?arrow_forward
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