New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here


by: Delilah Kuhic


Marketplace > University of Kentucky > Accounting > ACC 202 > MANAGERIAL USES OF ACCOUNTING INFO
Delilah Kuhic
GPA 3.94

Jean Cooper

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Jean Cooper
Class Notes
25 ?




Popular in Course

Popular in Accounting

This 9 page Class Notes was uploaded by Delilah Kuhic on Friday October 23, 2015. The Class Notes belongs to ACC 202 at University of Kentucky taught by Jean Cooper in Fall. Since its upload, it has received 104 views. For similar materials see /class/228282/acc-202-university-of-kentucky in Accounting at University of Kentucky.




Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 10/23/15
Chapter 5 A Price of a new printer relevant The price you paid for the old printer irrelevant The tradein value of the old printer is relevant Pa per costs are irrelevant The differences between the cost of ink cartridges is relevant 2392 Suppose an Olive Yard restaurant is considering whether to bake or buy bread Estimates variable costs of making each loaf include 50 of ingredients 22 of variable overhead 77 of direct labor Allocating fixed overhead based on DL assigns 99 of fixed overhead per loaf Local bakery would charge 174 per loaf 1 Unit cost of making the bread Direct material 50 Direct labor 77 Variable overhead 22 Variable cost per unit 149 magawn Fixed overhead per unit 99 f Full absorption cost per unit 248 2 Olive yard should bake the bread inhouse since the variable cost of making each loaf is less than the cost of outsourcing each loaf 3 What else should olive yard consider when making this decision a How does the quality and freshness of the bread compare b Will the bakery meet delivery time requirements c Could another more profitable product be made in its place C Myer food in Lexington ky manufactures and markets snack foods Deela Lee manages the company s fleet of 180 delivery trucks Lee has been charged with reengineering the fleet management function She has an important decision to make a Data Book value of myer foot s trucks with an estimated 6 yr life 3400000 Annual leasing fee for new fleetmanagement software 9000 Annual maintenance of trucks 150000 iv Fleet supervisor lee s annual salary 56000 lt Total annual salaries of myer food s five other fleet management employees 145000 b Outsourcing decision analysis Retain inhouse Outsource to fms Difference Annual leasing fee 9000 9000 for software Annual maintenance 150000 150000 of trucks Annual salaries of 145000 145000 five fleet management employees Fleet management 272000 272000 services annual fee Total cost of fleet 304000 272000 32000 Operating income for myer food will increase by 32000 by outsourcing the fleet management function Best systems incurred the following manufacturing costs when it produced 69000 units last year Best Systems does not yet know how many switches it will need this year however another company has offered to sell best systems the switch for 1550 per unit Assume that best systems can avoid 100000 of fixed costs a year by outsourcing production In addition because sales are increasing best systems needs 74000 switches a year rather than 69000 Data Direct Materials 621000 Direct labor 103500 Variable overhead 207000 Fixed overhead 414000 Total manufacturing cost for 69000 units 1345500 Incremental analysis for outsourcing decision Make unit Buy unit Cost to make minus cost to buy Variable cost per unit Direct materials 900 900 Direct labor 150 150 Variable overhead 300 300 Purchase price from 1550 1550 outsider Total variable cost 1350 1550 200 per unit Decision make the optical switch bc VC per unit is less then cost to buy Outsourcing Decision Make switches Buy switches Variable cost per unit 1350 1550 Units needed x74 000 x74 000 Total variable cost 999000 1147000 Fixed costs 414 000 314 000 Total relevant costs 1413000 1461000 Cost if making switches cost if outsourcing switches Variable costs fixed costs variable costs fixed costs Most Best Systems would be willing to pay to outsource is 1485 per unit JIJ Produced 73000 units last year a Direct materials 657000 Direct labor 182500 Variable overhead 219000 Fixed overhead 511000 Total manufacturing costs for 73000 units 1569500 Another company offered to sell switch for 1300 per unit Cool systems need 81000 optical switches next year Cool systems can use its idle facilities to manufacture another product that will contribute 220000 to operating income Best Use of Facilities Analysis Make Buy amp use facilities for other product Variable unit cost ofobtaining 1450 1300 optical swtiche of optical switches x81 000 x81 000 Total Variable cost of 1174500 1053000 obtaining the optical switches Expected profit contribution 220 000 Expected net cost of obtaining 1174500 833000 the optical switches Decision outsource the optical switches and use the facilities to manufacture the other product F G Chapter 6 I Sales price per unit Variable Cost per unit 350 Reworking defective units internal failure cost Litigation costs from product liability claims external failure cost Inspecting incoming raw materials appraisal cost Training employees prevention cost Warranty repairs external failure cost Redesigning the production process prevention cost Lost productivity due to machine break down internal failure cost Inspecting products that are halfway through the production process appraisal cost Incremental cost of using a highergrade raw material prevention cost Cost incurred producing and disposing of defective units internal failure cost Type of quality cost Cost External failure Costs of electronic components returned by customers External failure Cost incurred by millan s customer reps traveling to customer sites to repair defective products External failure Lost profits from lost sales due to reputation for lessthanperfect products Apparaisal Costs of inspecting components in one of millan s production processes Prevention Salaries of engineers who are designing components to withstand electrical overloads Internal failure Costs of reworking defective components after discovery by company inspectors StoreAll produces plastic storage bins for household storage needs The company makes two sizes of bins large 50 gallon and regular 35 gallon Demand for the product is so high that StoreAll can sell as many of each size as it can produce The company uses the same machinery to produce both sizes The machinery can only be run for only 3200 hours per period StoreAll can produce 12 large bins every hour compared to 17 regular bins in the same amount of time Fixed expenses amount to 110000 per period Sales prices and variable costs are as follows Regular Large S 880 S 1050 440 StoreAll Product Mix Analysis Regular Large Sales price per unit 880 1050 Less Variable Cost per unit x 350 x 440 Contribution margin per unit 530 610 Units per machine hour g Q Contribution Margin per MH 9010 7320 Decision StoreAII should emphasize the production of regular bins because the contribution margin per MH is higher StoreAll should spend 3200 machine hours making regular bins and 0 machine hours making large bins Operating income of bins per period 54400 Contribution margin per bin x530 Total contribution margin 288320 Less Fixed expenses 110 000 Operating Income 178320 2 StoreAll produces plastic storage bins for household storage needs The company makes two sizes of bins large 50 gallon and regular 35 gallon Demand for the product is so high that StoreAll can sell as many of each size as it can produce The company uses the same machinery to produce both sizes The machinery can only be run for only 2800 hours per period StoreAll can produce 9 large bins every hour compared to 16 regular bins in the same amount of time Fixed expenses amount to 100000 per period Assume now that demand for regular bins is limited to 40000 units and demand for large bins is limited to 21000 unites Store it should emphasize production of regular size bins since they are more profitable than the large bins 2800 4000016 30092700 Decision Store It should produce 40000 regular size bins and 2700 large size bins StoreIt Operating Income from Product Mix Regular Large Total of bins per period 40000 2700 Contribution Margin per X 470 X 580 bin Total Contribution 188000 15660 203660 Margin Less Fixed Expenses 100 000 Operating Income 103660 Explain why the operating income is less than it was when StoreIt was producing its optimal product mix The company had to give up some of the regular bin contribution margin per machine hour in order to produce large bins and The company had to produce less regular size bins to match demand for these bins 3 Suppose the Baseball Hall of Fame in Cooperstown New York has approached World Wide Cards with a special order The Hall of Fame wishes to purchase 59000 baseball card packs for a special promotion campaign and offers 039 per pack a total of 23010 World Wide Card s total production cost is 059 per pack as follows Variable Costs Direct Materials 011 Direct Labor 008 Variable Overhead 010 Fixed Overhead 030 Total Cost 059 World Wide Cards Incremental Analysis of Special Sales Order Expected increase in revenues 23010 Expected increase in expenses Variable manufacturing cost 17110 Fixed 39 U costs 9 Total expected increase in expenses 17110 Expected inc or decrease in operating income 5900 Accept the special sales order 4 Maui Stenback Sunglasses sell for about 154 per pair Suppose the company incurs the following average costs per pair Direct Materials 42 Direct Labor 11 Variable manufacturing overhead 7 Variable marketing expenses 3 Fixed manufacturing overhead 16 Total cost 79 Maui Incremental Sales Order increase in revenues 1449000 increase in cost cost increase in increase 39 income When deciding whether to accept a special order we should compare the extra revenues we will receive against the extra costs we will incur to fill the order Costs we will incur whether or not we fill the order are irrelevant to our decision Total cost making and selling of sunglasses is misleading 5 Exerlight produces two types of exercise treadmills regular and deluxe The exercise craze is such that everlight could use all of its available machine hours producing either model Per unit Deluxe regular Sales price 990 580 Costs DM 300 120 DL 80 182 Variable MO 246 82 Fixed MO 108 36 Variable OE 117 69 Total Cost 851 489 Operating Income 139 91 Product Mix Should produce highest contribution margin per unit 3x as much to deluxe as to each regular model Takes 3x as many MH to produce a deluxe model Deluxe model contributing 247 to operating income Exerlight can produce 3 units of the regular model contributing 381 to operating income Should produce only regular model Designer Moderately priced Avg sales price 205 84 Avg variable exp 70 22 Avg fixed exp 25 20 Avg operating inc 110 42 The Kyler store in charlotte NC has 10000 square feet of floor space If kyler emphasizes moderately priced goods it can display 600 items in the store If kyler emphasizes designer wear it can display only 400 designer items Kyler Product Mix Analysis Designer Moderately priced Units displayed per square 040 06 foot Contribution margin per X 135 X 62 unit Contribution margin per 5400 3720 square ft of display space Capacity square feet of X 10000 X 10000 display space Total contribution margin 54000 37200 at capacity Decision emphasize designer clothing


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.