Question : 121. The Stewart Cake Factory owns a building for its operations. : 1251724

121. The Stewart Cake Factory owns a building for its operations. Stewart uses only half of the building and is considering two options for the unused space. The Candy Store would like to purchase the half of the building that is not being used for $550,000. A 7% commission would have to be paid at the time of purchase. Ice Cream Delight would like to lease the half of the building for the next 5 years at $100,000 each year. Stewart would have to continue paying $9,000 of property taxes each year and $1,000 of yearly insurance on the property, according to the proposed lease agreement.Determine the differential income or loss from the lease alternative.

122. Crane Company Division B recorded sales of $360,000, variable cost of goods sold of $315,000, variable selling expenses of $13,000, and fixed costs of $61,000, creating a loss from operations of $38,000. Determine the differential income or loss from the sales of Division B. Should this division be discontinued?

123. Lockrite Security Company manufacturers home alarms. Currently it is manufacturing one of its components at a total cost of $45 which includes fixed costs of $15 per unit. An outside provider of this component has offered to sell them the component for $35. Provide a differential analysis of the outside purchase proposal.

124. An oven with a book value of $67,000 has an estimated 5 year life. A proposal is offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. The new machine has a five year life with no residual value. The new machine would reduce annual maintenance costs by $23,000. Provide a differential analysis on the proposal to replace the machine.

125. An unfinished desk is produced for $36.00 and sold for $65.00.  A finished desk can be sold for $75.00.  The additional processing cost to complete the finished desk is $6.65. Provide a differential analysis for further processing.

126. Rachel Cake Factory normally sells their specialty cake for $22. An offer to buy 100 cakes for $19 per cake was made by an organization hosting a national event in the city. The variable cost per cake is $11. A special decoration per cake will add another $1 to the cost. Determine the differential income or loss per cake from selling the cakes.

127. The Owl Company produces and sells Product X at a total cost of $35 per unit, of which $28 is product cost and $7 is selling and administrative expenses. In addition, the total cost of $35  is made up  of $24 variable cost and $11 fixed cost.  The desired profit is $6 per unit. Determine the markup percentage on product cost.

128. Ptarmigan Company produces two products. Product A has a contribution margin of $20 and requires 4 machine hours. Product B has a contribution margin of $18 and requires 3 machine hours. Determine the most profitable product assuming the machine hours are the constraint.

129. An employee of Morgan Corporation has found some partially completed units of Model X in a dusty corner of the warehouse.  A job ticket attached to the units indicates that a total of $750 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 Morgan spends $250 to complete the units, they could be sold for $600.      Required:      A.  What should Morgan do? Why?             B.  Identify the sunk cost, if any.

A.       Morgan should finish the units because the incremental revenue of $400 ($600 – $200) is greater than the incremental cost of $250.B.      The $750 in manufacturing cost that has already been incurred is sunk and not relevant.

130. Olsen Company produces two products. Product A has a contribution margin of $30 and requires 10 machine hours. Product B has a contribution margin of $24 and requires 4 machine hours. Determine the most profitable product assuming the machine hours are the constraint.