essentials of managerial accounting module 5

essentials of managerial accounting module 5

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essentials of managerial accounting module 5 attached are questions 1-3

Assignment 1 module 5

Quality Water boards, Inc., currently produces surfboards. Management is interested in outsourcing production of these surfboards to a reputable manufacturing company that can supply the surfboards for $630 per unit. Quality Water boards incurs the following annual production costs to produce 2,100 Quality Water Boards:

 

Per unit

Total annual cost of 2,100 units

Variable production costs

 

 

Direct materials

420

$882,000

Direct labor

105

220,500

Manufacturing overhead

53

111,300

Fixed production costs

 

 

Factory building and equipment lease

 

 

Factory insurance

 

189,000

Production supervisor’s salary

 

63,000

Total production costs

 

73,500

 

 

$1,539,300

Outsourcing production eliminates all variable production costs, the production supervisor’s salary, and factory insurance costs. Factory building and equipment lease costs will remain the same regardless of the decision to outsource or to produce internally.

1. Perform differential analysis using the format presented in 
Figure 7.2, “Make-or-Buy Differential Analysis for Best Boards, Inc.”
  https://saylordotorg.github.io/text_managerial-accounting/s11-02-make-or-buy-decisions.html#heisinger_1.0-ch07_s02_s01_f01 Assume that making the surfboards internally is Alternative 1 and that buying the surfboards from an outside manufacturer is Alternative 2.

2. Which alternative is best? Explain.

Assignment 2 module 5

The following annual income statement is for Apex Jewelry, Inc., a maker of fine jewelry:

Product Lines

 

Bracelets

Necklaces

Earrings

Total

Sales revenue

$787,500

$1,050,000

$262,500

$2,100,000

Variable costs

367,500

577,500

105,000

1,050,000

Contribution margin

$420,000

$472,500

$157,500

$1,050,000

Direct fixed costs

409,500

336,000

73,500

819,000

Allocated fixed costs

59,063

78,750

19,688

157,501

Profits (loss)

$-48,563

$57,750

$64,312

$157,501

Apex Jewelry is concerned about the losses associated with the bracelets product line and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on sales. For example, $59,063 in allocated fixed costs is allocated to the bracelets product line based on the bracelets product line sales as a percentage of total sales ($59,063 = $157,501 × [$787,500 ÷ $2,100,000]). If Apex Jewelry eliminates a product line, total allocated fixed costs are assigned to the remaining product lines. All variable costs and direct fixed costs are differential costs.

1. Using the differential analysis format presented in 
Figure 7.6, “Product Line Differential Analysis for Barbecue Company,”
 https://saylordotorg.github.io/text_managerial-accounting/s11-03-product-line-decisions.html#heisinger_1.0-ch07_s03_f03 determine whether Apex Jewelry would be better off dropping the bracelets product line or keeping the product line. Support your conclusion.

Assignment 3 module 5

The following annual income statement is for Prado & Associates, a firm that provides accounting and tax services to its customers:

Customers

 

BrasCo.

Anderson, LLC

Countywide Auto

Total

Sales revenue

1,260,000

787,500

1,102,500

3,150,000

Variable costs

735,000

315,000

840,000

1,890,000

Contribution margin

525,000

472,500

262,500

1,260,000

Direct fixed costs

210,000

189,000

267,750

666,750

Allocated fixed costs

126,000

78,750

110,250

315,000

Profits (loss)

189,000

204,750

-115,500

278,250

Prado & Associates is concerned about the losses associated with the Countrywide Auto account and is considering dropping this customer. Allocated fixed costs are assigned to customers based on sales. For example, $110,250 in allocated fixed costs is assigned to Countrywide Auto based on this customer’s sales as a percentage of total sales [$110,250 = $315,000 × ($1,102,500 ÷ $3,150,000)]. If a customer is dropped, total allocated fixed costs are assigned to the remaining customers. All variable costs and direct fixed costs are differential costs.

1. Using the differential analysis format presented in 
Figure 7.10, “Customer Differential Analysis for Colony Landscape Maintenance,”
https://saylordotorg.github.io/text_managerial-accounting/s11-04-customer-decisions.html#heisinger_1.0-ch07_s04_s01_f02  determine whether Prado & Associates would be better off dropping the Countrywide Auto account or keeping the account. Explain your conclusion.

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