EBK MANAGERIAL ACCOUNTING: THE CORNERST
7th Edition
ISBN: 9781337516150
Author: Heitger
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Textbook Question
Chapter 8, Problem 63P
Special-Order Decision, Qualitative Aspects
Randy Stone, manager of Specialty Paper Products Company, was agonizing over an offer for an order requesting 5,000 boxes of calendars. Specialty Paper Products was operating at 70% of its capacity and could use the extra business. Unfortunately, the order’s offering price of $4.20 per box was below the cost to produce the calendars. The controller, Louis Barns, was opposed to taking a loss on the deal. However, the personnel manager, Yatika Blaine, argued in favor of accepting the order even though a loss would be incurred. It would avoid the problem of layoffs and would help to maintain the company’s community image. The full cost to produce a box of calendars follows:
Later that day, Louis and Yatika met over coffee. Louis sympathized with Yatikás concerns and suggested that the two of them rethink the special-order decision. He offered to determine relevant costs if Yatika would list the activities that would be affected by a layoff. Yatika eagerly agreed and came up with the following activities: an increase in the state
- Total payroll is $1,460,000 per year.
- Layoff paperwork is $25 per laid-off employee.
- Rehiring and retraining is $150 per new employee.
Required:
- 1. CONCEPTUAL CONNECTION Assume that the company will accept the order only if it increases total profits (without taking the potential layoffs into consideration). Should the company accept or reject the order? Provide supporting computations.
- 2. CONCEPTUAL CONNECTION Consider the new information on activity costs associated with the layoff. Should the company accept or reject the order? Provide supporting computations.
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Feinan Sports, Inc., manufactures sporting equipment, including weight-
lifting gloves. A national sporting goods chain recently submitted a special
order for 4,600 pairs of weight-lifting gloves. Unfortunately, the order's
offering price of $14.80 per pair was far below the regular price of $25, and
even below the cost of production. One marketing manager was opposed to
taking a loss on the deal. However, the personnel manager argued in favor of
accepting the order even though a loss would be incurred; it would avoid the
problem of layoffs and would help maintain the community image of the
company. The full cost to produce and sell a regular pair of weight-lifting
gloves is presented below.
Direct material
Direct labor
Variable overhead
Fixed overhead
Variable selling and adm.
Total
7.5
3.9
1.6
3.1
2.8
18.9
No variable selling or administrative expenses would be associated with the
special order.
Required: (You must Provide supporting computations.)
1. Assume that the company has…
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. Anational sporting goods chain recently submitted a special order for 4,000 pairs of weight-liftinggloves. Feinan Sports was not operating at capacity and could use the extra business.Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them.The controller was opposed to taking a loss on the deal. However, the personnel manager arguedin favor of accepting the order even though a loss would be incurred; it would avoid the problemof layoffs and would help maintain the community image of the company. The full cost toproduce a pair of weight-lifting gloves is presented below.Direct materials $ 7.40Direct labor 3.80Variable overhead 1.60Fixed overhead 3.10 Total $15.90No variable selling or administrative expenses would be associated with the order. Non-unitlevel activity costs are a small percentage of total costs and are therefore not considered.Required:1. Assume…
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.80 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below.
Direct materials $ 7.50Direct labor 3.90Variable overhead 1.60Fixed overhead 3.10Total $16.10
No variable selling or administrative expenses would be associated with the order. Non-unit- level activity costs are a small percentage of total costs and are therefore not considered.…
Chapter 8 Solutions
EBK MANAGERIAL ACCOUNTING: THE CORNERST
Ch. 8 - What is the difference between tactical and...Ch. 8 - Prob. 2DQCh. 8 - What role do past costs play in relevant costing...Ch. 8 - Explain why depreciation on an existing asset is...Ch. 8 - Give an example of a future cost that is not...Ch. 8 - Can direct materials ever be irrelevant in a...Ch. 8 - Why would a firm ever offer a price on a product...Ch. 8 - What is a segment?Ch. 8 - Prob. 9DQCh. 8 - Discuss the importance of complementary effects in...
Ch. 8 - Prob. 11DQCh. 8 - Suppose that a product can be sold at split-off...Ch. 8 - Prob. 13DQCh. 8 - Which of the following is not a step in the...Ch. 8 - Costs that cannot be affected by any future action...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Which of the following statements is false? a....Ch. 8 - Prob. 7MCQCh. 8 - In a make-or-buy decision, a. the company must...Ch. 8 - Carroll Company, a manufacturer of vitamins and...Ch. 8 - Prob. 10MCQCh. 8 - Garrett Company provided the following...Ch. 8 - Jennings Hardware Store marks up its merchandise...Ch. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - In the sell-or-process-further decision, a. joint...Ch. 8 - Structuring a Make-or-Buy Problem Fresh Foods, a...Ch. 8 - Structuring a Special-Order Problem Harrison Ford...Ch. 8 - Segmented Income Statement Gorman Nurseries Inc....Ch. 8 - Prob. 19BEACh. 8 - Prob. 20BEACh. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Calculating Price by Applying a Markup Percentage...Ch. 8 - Calculating a Target Cost Yuhu manufactures cell...Ch. 8 - Structuring a Make-or-Buy Problem Coed Scents, a...Ch. 8 - Structuring a Special-Order Problem Rabbit Foot...Ch. 8 - Prob. 28BEBCh. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Prob. 32BEBCh. 8 - Prob. 33BEBCh. 8 - Prob. 34BEBCh. 8 - Brief Exercise 8-35 Calculating a Target Cost...Ch. 8 - Model for Making Tactical Decisions The model for...Ch. 8 - Prob. 37ECh. 8 - Use the following information for Exercises 8-38...Ch. 8 - Prob. 39ECh. 8 - Prob. 40ECh. 8 - Prob. 41ECh. 8 - Prob. 42ECh. 8 - Prob. 43ECh. 8 - Prob. 44ECh. 8 - Prob. 45ECh. 8 - Sell at Split-Off or Process Further Bozo Inc....Ch. 8 - Use the following information for Exercises 8-47...Ch. 8 - Prob. 48ECh. 8 - Calculating Price Using a Markup Percentage of...Ch. 8 - Target Costing H. Banks Company would like to...Ch. 8 - Keep or Buy, Sunk Costs Heather Alburty purchased...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Segmented Income Statement, Management Decision...Ch. 8 - Make or Buy, Qualitative Considerations Hetrick...Ch. 8 - Sell or Process Further Zanda Drug Corporation...Ch. 8 - Keep or Drop AudioMart is a retailer of radios,...Ch. 8 - Accept or Reject a Special Order Steve Murningham,...Ch. 8 - Cost-Based Pricing Decision Jeremy Costa, owner of...Ch. 8 - Product Mix Decision, Single Constraint Sealing...Ch. 8 - Special-Order Decision, Qualitative Aspects Randy...Ch. 8 - Sell or Process Further, Basic Analysis Shenista...Ch. 8 - Product Mix Decision, Single Constraint Norton...Ch. 8 - Sell at Split-Off or Process Further Eunice...Ch. 8 - Differential Costing As pointed out earlier in...Ch. 8 - Prob. 68CCh. 8 - Keep or Drop a Division Jan Shumard, president and...
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