1.

value:

17.00 points

Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals On Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow:
  Total Home Nursing Meals On Wheels Housekeeping 
  Revenues$926,000$267,000$406,000$253,000 
  Variable expenses 471,000 113,000 199,000 159,000 
          
  Contribution margin 455,000 154,000 207,000 94,000 
          
  Fixed expenses:         
    Depreciation 69,000 8,300 40,600 20,100 
    Liability insurance 43,900 20,800 7,600 15,500 
    Program administrators’ salaries 115,300 40,900 38,300 36,100 
    General administrative overhead* 185,200 53,400 81,200 50,600 
          
  Total fixed expenses 413,400 123,400 167,700 122,300 
          
  Net operating income (loss)$41,600$30,600$39,300$-28,300 
                  
  
*Allocated on the basis of program revenues.
     The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization’s finances and considers the net operating income of $41,600 last year to be too small. (Last year’s results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of discontinuing the housekeeping program.
     The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided.
Required: 
1a.What is the impact on net operating income by discontinuing housekeeping program? (Input the amount as a positive value. Omit the “$” sign in your response.)
  (Click to select)IncreaseDecrease in net operating income by$   
1b.Should the housekeeping program be discontinued?
  
  Yes No
2Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services.
  
  Yes No
    

2.

value:

17.00 points

Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for $33 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:
  Per Unit 15,800 Unitsper year
  Direct materials$9$142,200
  Direct labor 11 173,800
  Variable manufacturing overhead 1 15,800
  Fixed manufacturing overhead, traceable 9*   142,200
  Fixed manufacturing overhead, common, but allocated 13 205,400
     
  Total cost$43$679,400
         
 
*40% supervisory salaries; 60% depreciation of special equipment (no resale value).
Required:
1a.Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to two decimals and your final answers to the nearest dollar amount.Omit the “$” sign in your response.)
         Make        Buy
  Total relevant cost (15,800 units)$  $  
 
1b.Should the outside supplier’s offer be accepted?
    
  Accept Reject
2a.Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,720 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to two decimals and your final answers to the nearest dollar amount. Omit the “$” sign in your response.)
         Make        Buy
  Total relevant cost (15,800 units)$  $  
 
2b.Should Climate-Control, Inc., accept the offer to buy the thermostats from the outside supplier for $33 each?
    
  Reject Accept

3.

value:

17.00 points

Miyamoto Jewelers is considering a special order for 22 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $407 and its unit product cost is $269 as shown below:
    
  Direct materials$143 
  Direct labor 90 
  Manufacturing overhead 36 
    
  Unit product cost$269 
      
  
Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $6 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $5 per bracelet and would also require acquisition of a special tool costing $465 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.
Required:
a.What effect would accepting this order have on the company’s net operating income if a special price of $367 is offered per bracelet for this order? (Input the amount as a positive value. Omit the “$” sign in your response.)
  Net operating income (Click to select)increaseddecreased by$   
b.Should the special order be accepted at this price?
  
  No Yes
    

4.

value:

17.00 points

Sport Luggage Inc. makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.
 SkiVault GolfCaddy FishingQuiver  
  Selling price per unit$250 $320 $215  
  Variable cost per unit$110 $210 $155  
  Plastic injection molding machine processing    time required to produce one unit14 minutes13 minutes11 minutes 
  Pounds of plastic pellets per unit9 pounds10 pounds14 pounds 
  
Required:
1a.The total time available on the plastic injection molding machine is the constraint in the production process. What is contribution margin per unit of the constrained resources for Ski Vault, Golf Caddy and Fishing Quiver? (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
  Ski Vault          Golf Caddy       Fishing Quiver          
  Contribution margin$ per minute$ per minute$ per minute  
 
1b.Which product would be the most profitable use of this constraint?
  
  Ski Vault Fishing Quiver Golf Caddy
1c.Which product would be the least profitable use of this constraint?
  
  Ski Vault Fishing Quiver Golf Caddy
2a.A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection molding machine is no longer the bottleneck. Instead, the constraint is the total available pounds of plastic pellets. What is contribution margin per unit of the constrained resources for Ski Vault, Golf Caddy and Fishing Quiver? (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
 Ski Vault    Golf Caddy     Fishing Quiver         
  Contribution margin$ per pound$ per pound$ per pound  
 
2b.Which product would be the most profitable use of this constraint?
  
  Ski Vault Fishing Quiver Golf Caddy
2c.Which product would be the least profitable use of this constraint?
  
  Ski Vault Fishing Quiver Golf Caddy
3Which product has the largest unit contribution margin?
  
  Ski Vault Fishing Quiver Golf Caddy
                  

5.

value:

17.00 points

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $91,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $52,000; product Y, $93,000; and product Z, $64,000.
     Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:
ProductAdditionalProcessing CostsSales Value afterFurther Processing 
X$39,000$82,000 
Y$39,000$155,000 
Z$9,000$81,000 
  
Required:
a.Compute the incremental profit (loss) for each product. (Loss amounts should be indicated with a minus sign. Omit the “$” sign in your response.)
        Product X       Product Y       Product Z
  Incremental profit (loss)$  $  $  
 
b.Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
  
  Product X Product Y Product Z
c.Which product or products should be processed further? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
  
  Product X Product Y Product Z
          

6.

value:

15.00 points

Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company’s current activity level of 8,200 units per month are:
     
  Direct materials$2.10 
  Direct labor$2.00 
  Variable manufacturing overhead$0.90 
  Fixed manufacturing overhead$4.85 
  Variable selling and administrative expenses$1.00 
  Fixed selling and administrative expenses$1.00 
  
The normal selling price is $20 per unit. The company’s capacity is 9,300 units per month. An order has been received from a potential customer overseas for 1,100 units at a price of $17.00 per unit. This order would not affect regular sales.
Required:
1If the order is accepted, by how much will monthly profits increase or decrease? (The order would not change the company’s total fixed costs.) (Input the amount as a positive value. Omit the “$” sign in your response.)
  Monthly profits would (Click to select) increase decrease by$   
2Assume the company has 500 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
  Relevant cost per unit$   
     
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