Reference no: EM131079641
This SLP has two parts.
Part I
Herrestad Company does produce and sell two products and the details below will be used to prepare a segmented income statement (showing the income for each product and the total) for the company. Use ABC to allocate all fixed costs to the two products.
|
Background information
|
|
|
|
|
|
Total
|
Prod A
|
Prod B
|
|
Beginning inventory
|
0
|
|
|
|
Units produced
|
10,000
|
2,500
|
7,500
|
|
Units sold
|
8,000
|
2,000
|
6,000
|
|
Selling price per unit
|
$255
|
480
|
180
|
|
Variable costs per unit
|
|
|
|
|
Direct material
|
100
|
280
|
40
|
|
Direct labor
|
60
|
60
|
60
|
|
Variable overhead
|
25
|
40
|
20
|
|
Variable selling and admin. exp.
|
10
|
13
|
9
|
|
Fixed costs
|
|
|
|
|
Fixed manufacturing overhead
|
200,000
|
|
|
|
Fixed selling and administrative
|
100,000
|
|
|
|
Production runs (not $)
|
100
|
65
|
35
|
|
Number of sales reps (not $)
|
25
|
15
|
10
|
Here are the first few lines of the segmented income statement to help you get started. Complete the statement in good format and make sure you allocate the fixed costs to the two products. When done, comment on the information and the relative profitability of the two products.
|
Herrestad Company
Segmented Income Statement for the period ending Dec. 31, 2015
|
|
|
A
|
B
|
Total
|
|
Sales
|
$960,000
|
$1,080,000
|
$2,040,000
|
|
Variable costs:
|
|
|
|
|
Direct material
|
560,000
|
240,000
|
800,000
|
Part II
Differential analysis involves knowing which costs are relevant, i.e. future costs that vary among alternatives. It is important to know what information to use and not just how to execute the analysis.
Herrestad Company receives an offer to make a new product, called C, for a new customer. The customer wants to buy 1,000 units. Product C has the same cost structure as product B with three exceptions. The new customer is only willing to pay $150 per unit, direct materials costs will decrease by $12 per unit and Herrestad does not have to incur any variable selling and administrative expenses.
• Make a list of the expenses and amounts that are relevant for this decision. How much will the sale of this product contribute to the profitability of Herrestad?
• What if the company only pays $140 per unit? How does this change the contribution towards profitability?
• If you were the manager, would you accept this order? What considerations, other than financial would enter into your decision?
This Is a Signature Assignment Expectation for Module SLP
There are 2 specific learning outcomes:
1. apply business theories, models, and concepts to guide analysis of problems and situations
2. utilize data-driven analysis in making business decisions.
In this SLP assignment for Module 4 our emphasis will be on understanding the concept of relevant costs. You will be summarizing all of what you learned the in the Cases, SLPs, and Discussions.
The grading rubric has been developed to measure student success in meeting the ACC202 Module 4 SLP expectations related to applying your knowledge of relevant costs in the budget process.
SLP Assignment Expectations
• Demonstrate familiarity with the concept of relevant costs.
• Write 2-4 pages, showing computations and discussing the results.
• List supporting references and cite sources.
|
Solve for t=0 the following differential equations
: solve for t≥0 the following differential equations
|
|
Source of demand in the foreign currency exchange market
: In open economy, what is the source of demand in the foreign currency exchange market?
|
|
Determine the time response of the microphone
: Use Simulink or any other software to determine the time response of the microphone with τl= τ = 1 sec, ωn = 1500 Hz, ζ = 0.5 and K=2.5 due to the sonic boom pressure of FIGURE 6.47. Does this device give a good reproduction of the signal? Is this ..
|
|
Minimum average cost is referred to as the capacity of firm
: The point of minimum average cost is referred to as the capacity of the firm. Yet we draw the average cost curve extending both to the left and to the right of this point. The firm can operate below capacity, but how can a firm operate above capacity..
|
|
Demonstrate familiarity with the concept of relevant costs
: Demonstrate familiarity with the concept of relevant costs. Write 2-4 pages, showing computations and discussing the results. List supporting references and cite sources.
|
|
Deduce that the system of difference equations
: Deduce that the system of difference equations
|
|
What is the present worth of the electric vehicle program
: The US Department of Transportation has decided to invest in electric vehicles over the next 10 years. They will fund $0.5 million in year 1, $2 million in year 2, $3.5 million in year 3, $5 million in year 4 and $6.5 million each year thereafter. Gi..
|
|
What is the annual worth of this pension
: Shepherd Book invests $15,000 in a pension. During the first year, the pension will be worth $1,000, the second year $2,000, the third year $1,000, and the fourth year $2,000, and so on. What is the annual worth of this pension to Rev. Book, given th..
|
|
Though the inflation rate changed over time
: What are expectations, and why are they important in macroeconomic models? What would you think about a macroeconomic model that assumed that people’s expectations of inflation were constant, even though the inflation rate changed over time?
|