Incremental Analysis Assignment
12A A General Arial EWrap Text A a Merge & Center BIU 0Conditional Formatting a Paste M $% +.0 .00 .00.0 Clipboard Alignment Sty Font Number frx D4 H K F G D A (b) Should Schopp Inc. buy the lamp shades? 30 31 32 33 34 35 36 (c) Would your answer be different in (b) if the productive capacity released by not making the lampshades be used to produce income of 37 38 39 40 41 42 43 44 Net Income 45 Increase 46 (Decrease) S0 Buy S0 Make 47 $0 Total annual cost 48 0 0 C Opportunity cost 49 S0 S0 Total cost 50 51 52 53 Sheet3 E7-5 Make or Buy ES-9 Break-Even Ready Mrs.Lissa Desktop Libraries isphen 4 5 6 B C D G H Date: 4 5 E7-5-Use incremental analysis for make-or-buy decision 6 Managerial Accounting, 6 Edition, by Weygandt, Kieso, and Kimmel 7 Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse 9 Exercise E7-5 Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently 100% of capacity, and variable manufacturing overhead is charged to production at of direct labor cost. The direct materials and direct labor cost per unit to make the lamp 10 operating at of 11 the rate 70% 12 shades are $4.00 30,000 and $5.00 respectively. Normal production is 13 table lamps per year A supplier offers to make the lampshades at a price of 15 supplier's offer, all variable manufacturing costs will be eliminated, but the 16 overhead currently being charged to the lamp shades will have to be absorbed by other products. 17 Instructions:
18 (a) Prepare the incremental analysis for the decision to make or per unit. If Schopp Inc. accepts the $45,000 of fixed manufacturing 14 $12.75 the lamp shades. 19 20 Net Income 21 Increase Buy (Decrease) 22 Make Direct materials (30,000 x S4.00) Direct labor (30,000 $5.00) Variable manufacturing costs (150,000 70%) Fixed manufacturing costs Purchase price (30.000 x S12.75) NES9 Break-Even Sheet3 E7-5 Make or Biy 23 24 25 26 2 7 Ready E Mrs.Lissa K Desktop Libraries F7 FR F5 F6 F3 F4 F2 Esc % # ! 6 5 € 4 2 Y T R W Tab Times New Roman A A 12 Wrap Text General A E BIU Merge & Center $ % +.0 .00 .00 0 oard Font Alignment Number v10 fr A D F G H K Exercise E7-5 Schopp Inc. has been manufacturing its own shades for its table lamps. The company is operating at the rate o 70% 100% of capacity, and variable manufacturing overhead is charged to the production of direct labor cost. The direct materials and direct labor cost per unit to make the la 11 12 shades are $4.00 respectively. Normal production is 30,000 and $5.00 table lamps per year. A supplier offers to make the lampshades at a price of $12.75 per unit. If Schopp Inc. accepts t supplier's offer, all variable manufacturing costs will be eliminated, but $45,000 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products. Instructions (a) Prepare the incremental analysis for the decision to make or buy the lampshades. 13 14 15 16 17 18 19 Net 20 Income 21 Buy Increase 22 Make Direct materials (30,000 x $4.00) Direct labor (30,000 x $5.00) Variable manufacturing costs (150,000 x 70%) Fixed manufacturing costs Purchase price (30,000 x $12.75) Total annual cost 23 24 25 26 27 28 29 30 31 (b) Should Schopp Inc. buy the lampshades? 36 E7 5Makeo Buy vene Sheets Reidy MrsLissa Desktop Libraries Inspiron FB F7 F6 F5 F4 F3 F2 F1 Esc & % 4 5€6 3 2 D E F G H K er on Using Microsoft Excel in Accounting bew A Schildhouse rcise E5-9 The Green Acres Inn is trying to determine its break-even point. The inn has ms that it rents at 50 $60.00 night. Operating costs are as follows. $6,200 per month 1,100 per month 1,000 per month 100 per month 11 per room 28 per room Salaries Utilities Depreciation Maintenance Maid service Other costs Instructions: Determine he inns break-even point in a number of rented rooms per month. Contribution margin per room: Room rent Maid service Fixed costs: Salaries Utilities Depreciation Other costs Contribution margin per toom S0 Maintenance Total fixed costs 50 25 26 DIVOrooms $0 Break-even point in rooms S0 27 28 (2) Determine the inn's break-even point in dollars. Break-even point in rooms 29 30 =DIV 01 Room rent 81 DIVO Break-even point in dollars 32 Or. 50 DINO Contribution marsin ratic 5 DIVO =DIV0 $00 Fixed costs Contribution margin ratio= 27 ake or Bu ES 9 Break Ready MrsLssa Desktop Libraries inspire F7. .