Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Sell As Is or Process Further (Own Problem)
Rachel Green Co
...
At split-off,
the garments can either be sold plain or further processed into printed garments
...
sell as is, and process further
in order to maximize profit?
a
...

c
...


Process Further: J and E; Sell as is: O
Process Further: O and E; Sell as is: J
Process Further: J; Sell as is: O and E
Process Further: J, O, and E

Answer: C
Solution:

Product

J
O
E

Sales Value
at Split-off
(a)
₱ 14,500
8,900
10,400

Sales
Value
Further
after
processing
further
cost/
processing Incremental
(b)
Cost
₱ 16,700
₱ 1,500
12,100
3,200
15,350
5,300

Incremental
Benefit
(b – a)
<
=
>

₱ 2,200
3,200
4,950

Decision

Process further
Indifferent*
Sell as is

*If the incremental cost is equal to the incremental benefit, the company may either sell
the product as is or process it further
...
₱ 34,500
b
...
₱ 21,300
d
...
₱ 23,500
b
...
₱ 37,700
d
...
manufactures flour used in its pastry and pasta products
...
flour at ₱ 200 per kilo
...
The equipment used for production could be rented out
for ₱ 20,000
...
₱ 117,500
b
...
₱ 107,500
d
...
20
Opportunity Cost
Total Relevant Cost to Make

₱ 60,000
27,000
18,000
2,500
20,000
₱ 127,500

Question #2: Should Monica Bing Co
...

b
...

d
...
outsource flour from Nestley Toulose
...
can rent the machine out for ₱15,000, all other information retained, should the
company still outsource?
a
...

b
...

c
...

d
...

Answer: D
Solution:
Relevant cost to buy: ₱ 210 x 600 = ₱126,000
Relevant cost to make:
Direct Materials
Direct Labor
Variable Overhead
Fixed Overhead (Avoidable)
₱ 12,500 x
...
to make the flour instead of outsourcing
...
540 Cost Accounting 16th ed
...
Vanderbeck)
Charlie Co
...
The following
information is available:
Cost to Charlie to make the part:
Direct Materials
...
16
Variable Factory Overhead
...
6
Total
...
$ 36
If Charlie buys the part from Delta instead of making it, Charlie could not use the released
facilities in another manufacturing activity
...

1
...
What decision should Charlie make?
Solution:
1
...
2
Total relevant cost per unit
$ 33
...
Charlie should continue making the part since the relevant cost to buy is greater than the
relevant cost to make by $ 2
...




---