Week 5 Online Assignments



Week 5 Online Assignments

E9-6, (a) (1)

SY TELC

Particulars

Make

Buy

Net income increase (decrease)

Direct Materials ($40/unit)

$800,000

-

$800,000

Direct Labour ($30/unit)

600,000

-

$600,000

Variable Overhead ($6/unit)

120,000

-

$120,000

Allocated Fixed Overhead ($25/unit)

500,000

200,000

$300,000

Purchase Price ($90 x 20,000 units)

-

1,800,000

($1,800,000)

Total cost

$2,020,000

2,000,000

$20,000

SY Telc should Buy since it generates an additional net income of $ 20,000.

E9-6, (a) (2)

SY TELC

Particulars

Make

Buy

Net income increase (decrease)

Direct Materials ($40/unit)

$800,000

-

$800,000

Direct Labour ($30/unit)

600,000

-

$600,000

Variable Overhead ($6/unit)

120,000

-

$120,000

Opportunity Cost (Prod. resources)

300,000

-

$300,000

Purchase Price ($90 x 20,000 units)

-

1,800,000

($1,800,000)

Total cost

$2,020,000

1,800,000

$20,000

SY Telc should Buy since it generates an additional net income of $ 20,000.

E9-6, (b)

Various qualitative factors arise from SY Telc's decision to buy from Chen Inc.; First and foremost, there deems to the possibility of a difference in product quality and an inferior quality product might lead to dissatisfied customers which in turn would drastically reduce sales and revenues. Another impact is the redundancy created amongst the employees currently employed for producing the robots. there can also be times when there is a disruption or delays in supply which would ultimately cause inconvenience to SY Telc and its customers as well

E9-11

Twyla Enterprises

Particulars

Retain Machine

Replace Machine

Net Income increase (decrease)

Est. Annual Operating costs

$120,000

a

$90,000

b

$30,000

New Machine Purchase

-

25,000

25,000

Sale Of Old Machine

-

5,000

5,000

Total

$120,000

$110,000

$10,000

It is clear from the calculations above that if the machine is kept (retained) and the new machine is not purchased, then the total cost for Twyla Enterprises would be $ 120,000. on the other hand, if it decides to purchase the new machine and sell out the old machine, then it would incur total costs amounting to $ 110,000. this would result in an overall increase in the net income (profit) of about $10,000 (in five years). Therefore it is recommended that Twyla Enterprises should replace its machine.

P9-1A, (a)

Pro Sports Inc.

Particulars

Special Order

Sales ($28/unit)

a

$280,000

Variable Cost of Goods Sold ($22.4/unit)

b

224,000

Variable Selling ...