Question : Exercises 132.Print Jiff manufactures books. The company trying to decide whether : 1302796

Exercises

132.Print Jiff manufactures books. The company is trying to decide whether to print the individual pages in-house (the current practice) or have a printing company perform this task. For each of the following items, indicate if the itemis relevant or not relevant to this decision.

________A.Cost of buying ink

________B.Rent on the Print Jiff factory

________C.Original price of the book binder owned by Print Jiff

________D.Salvage value of the binding equipment owned by Print Jiff

________E.Cost of paper for printing books

________F.Morale of employees in the printing company

133.Marcus Company requires three units of P11 for every unit of A5 that it produces. Currently, P11 is made by Marcus, with the following per unit costs in a month when 4,000 units were produced:

Direct materials$4.00

Direct labor1.50

Manufacturing overhead 2.60

Total$8.10

Variable manufacturing overhead is applied at $1.00 per unit. The other $1.60 of overhead consists of allocated fixed costs. Marcus will need 6,000 units of P11 for next year’s production.

Landers Corporation has offered to supply 6,000 units of P11 at a price of $7.00 per unit. If Marcus accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Marcus Company accept the offer from Landers Corporation?

134.An employee of SaniTan has found some partially completed units of Model 45 in a dusty corner of the warehouse. A job ticket attached to the units indicates that a total of $600 in manufacturing costs have been used to bring the materials to this point in the manufacturing process. The units can be sold in their current condition for $200 to a scrap metal dealer. If SaniTan spends $180 to complete the units, they canbe sold for $500.

a.What should SaniTan? Justify your answer.

b.Identify a sunk cost in this problem.

135.Each year, Randall Data Source surveys 5,000 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Sanderson Data, a company that has offered to conduct the survey and summarize results for $50,000. Randall Wince, the president of Randall Data Source, believes that Sanderson will do a higher-quality job than his company has been doing, but is unwilling to spend more than $12,000 above current costs. The head of bookkeeping for Randall has prepared the following summary of costs related to the survey in the prior year.

Mailing$27,000

Printing (done by Sanderson Data)               9,000

Salary of part-time employee who stuffsenvelopes and

summarizes survey data (130 hours × $16)              2,080

Share of depreciation of computer and software used to

track survey responses and summarize results              1,200

Share of electricity/phone/etc. based on square feet of

space occupied by the part-time employee                     600

Total$39,880

Prepare an incremental analysis in good form to determine the impact on net income of hiring an outside company versus conducting the survey in house. Will Randall Data Source accept the Sanderson offer? Why or why not?

136.Starwood Aviation produces an executive jet for which it currently manufactures anairflow lever. The cost of eachlever is indicated below:

Variable costs

Direct material$300

Direct labor200

Variable overhead 150

Total variable costs$650

Fixed costs

Depreciation of equipment              120

Depreciation of building80

Supervisory salaries 140

Total fixed costs 340

Total cost$990

The company has an offer from Lans Levers to produce the part for $700 per unit and is able to supply the 600 levers needed in the coming year. If the company accepts this offer and shuts down production of levers, supervisors will be reassigned to other areas needing their services. The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the production of the levercan be used by another production group that is currently leasing space for $21,000 per year. Prepare a single column incremental analysis in good form to determine if the company should make or buy the lever.