Haslett Inc Sales (units) Sales Less: Variable Cost - COGS - Selling & Admin Contribution Margin Less:

Fixed Cost - COGS - Selling & Admin Net income P7-1A 90,000 Cost/unit 50.00 25.00 2.50 22.50 10.00 1.50 11.00

$ 4,500,000 2,250,000 225,000 2,025,000 900,000 135,000 990,000

a) An incremental analysis for the special order Reject Order 9,000 units Sales (units) 9,000 Cost/unit $ Sales 32.00 0 Less: Variable Cost - COGS 25.00 0 - Selling & Admin 3.00 0 Contribution Margin 4.00 0 Less: Fixed Cost - COGS 0 0 - Selling & Admin 0 0 Net income 4.00 0

Accept Order 9,000 units $ 288,000 0 225,000 27,000 36,000 0 0 36,000

Net Income Inc/(Dec) $ 288,000 225,000 27,000 36,000 0 0 36,000

b) Yes, Haslett Inc should accept the order since it will contribute an additional income of $36,000 c) The minimum selling price on the special order to produce net income $5.00 per ball: The current selling price per ball of $32 contribute a profit margin of $4.00 per ball . Therefore, to gain profit $5.00 per ball, then the selling price should be increase to another dollar ie $33 per ball. d) The nonfinancial factors should management consider in making its decision: - machine age - machine capacity - maintenance cost

P7-2A

Dunham Manufacturing Company a) Incremental Analysis for make or buy decision Net Income Inc/(Dec) $ 77,000 72,000 10,300 4,000 (140,000) (8,500) (17,500) (2,700)

Direct Material Direct Labour Manufacturing Cost Rental Purchase Price Receiving Clerk Freight Total Annual Cost

35,000 x 2.2 3 x 2000hrs x 12 5,000 x $0.80 35,000 x $4.00 35000 x $0.50

Make $ 77,000 72,000 10,300 4,000 0 0 0 163,300

Buy $ 0 0 0 0 140,000 8,500 17,500 166,000

Dunham should make the part as it will incurred loss of $2,700 if Dunham purchase the part. b) Incremental analysis on additional $12,000 net income on released facilities if the management decide to purchase the part Net Income Inc/(Dec) $ 77,000 72,000 10,300 4,000 (140,000) (8,500) (17,500) 12,000 9,300

Make Direct Material Direct Labour Manufacturing Cost Rental Purchase Price Receiving Clerk Freight Opportunity Cost Total Annual Cost 35,000 x 2.2 3 x 2000hrs x 12 5,000 x $0.80 35,000 x $4.00 35000 x $0.50 $ 77,000 72,000 10,300 4,000 0 0 0 12,000 175,300

Buy $ 0 0 0 0 140,000 8,500 17,500 166,000

Dunham should purchase the part as it will incurred additional profit of $12,000 to the savings on the rental storage space which has increase the income by $9,300. $12,000 is an opportunity cost to the rental saving of $4,000. c) The nonfinancial factors that Dunham should consider in the decision are: - the company will be at risk if continuing dependant on suppliers of the part; - the quality of purchase parts may be not the same quality to the make parts; - the direct labour will have to be terminated if Dunham decise to purchase the parts;

P11-3A

Goltra Clothiers a) The total, price and Quantity Variances for material and labour Material Variances AQ x AP 57,000 yds x $7.20 = $410,400 Price Variance $410,400 - $397,600 = $22,800 U Total Material Variance ($22,800) U + $13,600 F = $9,200 U Labour Variances AH x AR 11,200 hrs x $11.20 = $125,440 Rate Variance $125,440 - $128,800 = $3,360 F Total Material Variance $3,360 F + $6,900 F = $10,260 F b) Overhead variances AH x AR 11,200 hrs x $11.34 = $127,000 Total Overhead Variance $127,000 - $109,740 = $17,260 U c) Management investigation if variances are more than 5% from standard Price shows an unfavorable variances of $22,800 or 5.8%. The standard price was at $6.80 whereas the raw material for the actual production was purchased at $7.20 AH x SR 11,200 hrs x $11.50 = $128,800 Aq x SP 57,000 yds x $6.80 = $387,600

The variances may be due to the fluctuation of prices which the company did not anticipated. The company ne prices regularly. The company may be import the material and did not anticipate with the foregn currency fluct delivery and periodicorder of the raw material is also important, to avoid unneccessary charges.

Eventhough efficiency variances recorded favourable at $6,900 but it is still more than 5% ie 5.1%. The compan

SQ x SP 59,000 yds x $6.80 = $401,200 Quantity Variance $387,600 - $401,600 = $13,600 F

SH x SR 11,800 hrs x $11.50 = $135,700 Efficiency Variance $128,800 - $135,700 = $6,900 F

SH x SR 11,800 hrs x $9.30 = $109,740

ual production was purchased at $7.20

any did not anticipated. The company need to update the anticipate with the foregn currency fluctuation. Mode of oid unneccessary charges.

s still more than 5% ie 5.1%. The company should look into this