Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 20.35P
Supply-chain effects on total relevant inventory cost. Peach Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 5% of motherboards purchased from Alpha will be inspected and 25% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta:
Alpha | Beta | |
Number of orders per year | 50 | 50 |
Annual motherboards demanded | 10,000 | 10,000 |
Price per motherboard | $108 | $105 |
Ordering cost per order | $13 | $10 |
inspection cost per unit | $6 | $6 |
Average inventory level | 100 units | 100 units |
Expected number of stockouts | 100 | 300 |
Stockout cost (cost of rush order) per stockout | $4 | $6 |
Units returned by customers for replacing motherboards | 50 | 500 |
Cost of replacing each motherboard | $30 | $30 |
Required annual return on investment | 10% | 10% |
Other carrying cost per unit per year | $3.50 | $3.50 |
- 1. What is the relevant cost of purchasing from Alpha and Beta?
Required
- 2. What factors other than cost should Peach consider?
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Preparing variable and absorption costing income statements
This problem continues the Piedmont Computer Problem situation from Chapter 20. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Assume the beginning balance in Finished Goods Inventory is $0. Additional data for the first month of 2020:
Requirements
Compute the product cost per unit produced under absorption costing and under variable costing.
Prepare income statements for January 2020 using:
absorption costing.
variable costing.
3. Is operating income higher under absorption costing or variable costing in January? What causes the difference?
Polar Bear
Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use:
Alpha
or
Beta.
Due to differences in the product failure rates in the two companies,
10%
of motherboards purchased from
Alpha
will be inspected and
30%
of motherboards purchased from
Beta
will be inspected. The following data refer to costs associated with
Alpha
and
Beta:
Number of orders per year
90. 90
Annual motherboards demanded
19,000 19,000
Price per motherboard
$96 $90
Ordering cost per order
$10 $11
Inspection cost per unit
$5 $5
Average inventory level
200 units 200 units
Expected number of stockouts
200 600
Stockout cost (cost of rush order) per stockout
$3 $7
Units returned by customers for replacing motherboards
90 900
Cost of replacing each motherboard
$23 $23
Required annual return on investment
10% 10%
Other carrying cost per unit per year
$2.30 $2.30
Requirement 1. What is the relevant cost of purchasing from…
Widget Co. produces widgets for customers. The company has provided the following financial information for the past year. Each
scenario below is separate.
Product Selling price per unit Sales Quantity Variable cost per unit Fixed costs
Widgets
$9.00
528,000
$2.00 $67,000
Do not enter dollar signs or commas in the input boxes.
Round breakeven units up to the nearest whole number.
Round breakeven sales to the nearest whole number.
a) Calculate break-even units and break-even sales.
Breakeven units =
Breakeven sales = $
b) Suppose the company would like to generate an operating profit of $5,000. Determine the revenue that is needed to obtain this target,
and calculate the number of units that need to be produced to meet this goal.
Breakeven units =
Breakeven sales = $
c) Suppose the company decides to lower the selling price from $9.00 per unit to $8.00 per unit. Calculate break-even units and break-
even sales.
Breakeven units =
Breakeven sales = $
d) Suppose that fixed costs drop to…
Chapter 20 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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