Learning Materials
Features
Discover
Chapter 25: Q25-14RQ (page 1406)
When completing a differential analysis, when are the differences shown as positive amounts? As negative amounts?
Answer
Ifrevenues increase from alternative one to two, it is positive, and ifrevenue decreasesfrom alternative one to two, it is shown as negative.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Refer to Exercise E25-18. Cool Systems needs 79,000 optical switches. By outsourcing them, Cool Systems can use its idle facilities to manufacture another product that will contribute $225,000 to operating income.
Requirements
1. Identify the expected net costs that Cool Systems will incur to acquire 79,000 switches under three alternative plans: make the switches, buy the switches and leave facilities idle, buy the switches and use the idle facilities to make another product.
2. Which plan makes the best use of Cool System鈥檚 facilities? Support your answer.
Johnson Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Johnson Builders鈥檚 costs per developed sublot are as follows:
Land \(50,000
Construction 123,000
Landscaping 9,000
Variable selling costs 8,000
Johnson Builders would like to earn a profit of 14% of the variable cost of each home sold. Similar homes offered by competing builders sell for \)207,000 each. Assume the company has no fixed costs.
Requirements
1. Which approach to pricing should Johnson Builders emphasize? Why?
2. Will Johnson Builders be able to achieve its target profit levels?
3. Bathrooms and kitchens are typically the most important selling features of a home. Johnson Builders could differentiate the homes by upgrading the bathrooms and kitchens. The upgrades would cost \(16,000 per home but would enable Johnson Builders to increase the sales prices by \)28,000 per home.
(Kitchen and bathroom upgrades typically add about 175% of their cost to the value of any home.) If Johnson Builders makes the upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner?
Dan Jacobs, production manager for GreenLife, invested in computer-controlled production machinery last year. He purchased the machinery from Superior Design at a cost of \(3,000,000. A representative from Superior Design has recently contacted Dan because the company has designed an even more efficient piece of machinery. The new design would double the production output of the year-old machinery but would cost GreenLife another \)4,500,000. Jacobs is afraid to bring this new equipment to the company president鈥檚 attention because he convinced the president to invest $3,000,000 in the machinery last year.
Explain what is relevant and irrelevant to Jacobs鈥檚 dilemma. What should he do?
This problem continues the Piedmont Computer Company situation from Chapter 24. Piedmont Computer Company鈥檚 payroll accountant has submitted her resignation and will be leaving the company in two weeks. The company must decide if it will hire a replacement or outsource the payroll position. The current employee earns a salary of \(40,000. Medical insurance, employer payroll taxes, and contributions to the pension plan for this position cost \)7,600. The company has already invested \(22,000 in payroll software. Required annual updates to remain in compliance with all state and federal laws are \)495. The company also spends \(1,750 per year in professional development for this position to ensure the employee stays up-to-date with payroll changes. Piedmont Computer Company pays its employees weekly. Payroll Professionals will processthe company鈥檚 weekly payroll for \)1,000 per week. This fee also includes preparing all necessary payroll tax returns, reports, and W-2s.
Requirements
1. Prepare a differential analysis to determine if Piedmont Computer Company should replace the employee or outsource the payroll function.
2. What other factors should Piedmont Computer Company consider in making this decision?
Each morning, Max Smith stocks the drink case at Max鈥檚 Beach Hut in Myrtle Beach, South Carolina. The drink case has 120 linear feet of refrigerated drink space. Each linear foot can hold either six 12-ounce cans or three 20-ounce bottles.
Max鈥檚 Beach Hut sells three types of cold drinks:
1. Licious-Ade in 12-oz. cans for \(1.40 per can
2. Licious-Ade in 20-oz. bottles for \)1.90 per bottle
3. Pep-Cola in 20-oz. bottles for \(2.20 per bottle
Max鈥檚 Beach Hut pays its suppliers:
1. \)0.20 per 12-oz. can of Licious-Ade
2. \(0.35 per 20-oz. bottle of Licious-Ade
3. \)0.55 per 20-oz. bottle of Pep-Cola
Max鈥檚 Beach Hut鈥檚 monthly fixed costs include:
Hut rental \(355
Refrigerator rental 65
Max鈥檚 salary 1,700
Total fixed costs \)2,120
Max鈥檚 Beach Hut can sell all the drinks stocked in the display case each morning.
Requirements
1. What is Max鈥檚 Beach Hut鈥檚 constraining factor? What should Max stock to maximize profits?
2. Suppose Max鈥檚 Beach Hut refuses to devote more than 80 linear feet to any individual product. Under this condition, how many linear feet of each drink should Max鈥檚 stock? How many units of each product will be available for sale each day?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine