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a.
Continue Discontinue
Cups Cups on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (loss)
b.
The Cups line should be since income
would by if the cups were discontinued.
Score:
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Instructions
Exercise 25-4
Name:
Section:
0%
Continue or Discontinue Cups
March 31, 2016
Differential Effect
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Differential Analysis
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a.
Continue Discontinue
Cups Cups on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues 31,300$ –$ (31,300)$
Costs:
b.
The Cups line should be retained since income
Differential Effect
Exercise 25-4
Name:
Solution
Section:
March 31, 2016
Differential Analysis
Continue or Discontinue Cups
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a.
Make Carrying Buy Carrying
Case Case on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Costs:
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Income (loss)
b.
Assuming there are no better uses for the spare capacity,
the carrying cases should be since costs per unit
would by by doing so.
The fixed factory overhead is to the decision.
Score:
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Exercise 25-7
Name:
Section:
0%
Make or Buy Carrying Case
July 19
Differential Effect
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Differential Analysis
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a.
Make Carrying Buy Carrying
Case Case on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Costs:
Purchase price
–$ (70.00)$ (70.00)$
b.
Assuming there are no better uses for the spare capacity,
the carrying cases should be manufactured since costs per unit
July 19
Differential Analysis
Make or Buy Carrying Case
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Exercise 25-7
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Differential Effect
Direct labor per unit
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a.
Layout Pages Purchase
Internally Layout Services on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Costs:
Purchase price of layout work
Salaries
Benefits
Supplies
Office expenses
Office depreciation
Computer depreciation
Income (loss)
b.
c.
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Differential Analysis
[Key essay answer here]
Layout Pages Internally or Purchase Layout Services
February 22
Differential Effect
[Key essay answer here]
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Exercise 25-8
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Section:
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a.
Layout Pages Purchase
Internally Layout Services on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Costs:
Purchase price of layout work – (312,000) (312,000)
Salaries (224,000) – 224,000
b.
c.
February 22
Differential Analysis
Layout Pages Internally or Purchase Layout Services
ON
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The benefit from using an outside service is shown to be $8,000 greater than performing the layout work
Before electing to terminate the five employees, the guild should consider the long-run impact of the
Differential Effect
Exercise 25-8
Name:
Solution
Section:
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a.
Continue with Replace
Old Machine Old Machine on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues:
Sales (5 years)
Costs:
Purchase price
Direct materials (5 years)
Direct labor (5 years)
Power and maintenance (5 years)
Taxes, insurance, etc. (5 years)
Selling and admin. expenses (5 years)
Income (loss)
b.
The proposal be accepted.
c.
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Differential Analysis
[Key essay answer here]
Keep or Replace Machine
May 4
Differential Effect
Score:
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Exercise 25-10
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Section:
0%
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a.
Continue with Replace
Old Machine Old Machine on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues:
Sales (5 years) 1,025,000$ 1,025,000$ –$
Costs:
Purchase price – (180,000) (180,000)
b.
The proposal should not be accepted.
c.
May 4
Differential Analysis
Keep or Replace Machine
ON
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In addition to the factors given, consideration should be given to such factors as: Do both present
Differential Effect
Exercise 25-10
Name:
Solution
Section:
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Enter a zero in cells you would otherwise leave blank.
a.
Sell Regular
Columbian Into Decaf on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues
Costs
Income (loss)
b.
The differential revenue from processing further to Decaf Columbian is
the differential cost of processing further. Thus, Rise N’ Shine Coffee
process further into Decaf Columbian.
c.
The decrease in selling price of Decaf Columbian that would cause neither an advantage or
disadvantge for processing further:
The current selling price less the decrease would be:
Verify by completing the following differential analysis based on the new selling price:
Sell Regular
Columbian Into Decaf on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues
Costs
Income (loss)
Exercise 25-12
Name:
Section:
Volume of Decaf Columbian
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Differential Analysis
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0%
Process Futher
Differential Effect
Sell Regular Columbian or Process Further into Decaf Columbian
October 6
Differential Effect
Process Futher
Net Advantage of Further Processing
=
=
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a.
Sell Regular
Columbian Into Decaf on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues 55,320$ 67,716$ 12,396$
c.
Increase in selling price of Decaf Columbian that would cause neither an advantage or
Process Futher
Differential Effect
disadvantge for processing further:
$2,166
5,700
ON
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Differential Effect
Exercise 25-12
Name:
Solution
Section:
October 6
Differential Analysis
Process Futher
Sell Regular Columbian or Process Further into Decaf Columbian
Net Advantage of Further Processing
Volume of Decaf Columbian
=
=
$0.38
An asterisk (*) will appear to the right of an incorrect entry, or above and below in formulas.
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a.
Reject Order Accept Order on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues
Costs:
Direct materials
Direct labor
Variable factory overhead
Variable selling and admin. expenses
Shipping costs
Certification costs
Income (loss)
Goodman accept the special order from Euro Motors.
b.
Alternative calculation:
Differential Effect
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Differential Analysis
Reject or Accept Order
January 21
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Exercise 25-15
Name:
Section:
0%
=
Number of Units
Differential Income from
Accepting Special Order
Minimum Price per Unit
=
Total Differential Costs
=
=
Selling Price Offered
by Euro Motors
–
Number of Units
–
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Enter a zero in cells you would otherwise leave blank.
a.
Reject Order Accept Order on Income
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues –$ 2,320,000$ 2,320,000$
Costs:
Direct materials – (1,120,000) (1,120,000)
b.
2,234,000
20,000
Alternative calculation:
=
$111.70
Reject or Accept Order
Differential Effect
Total Differential Costs
Number of Units
January 21
Number of Units
=
$111.70
Minimum Price per Unit
=
Exercise 25-15
Name:
Solution
Section:
ON
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Differential Analysis
=
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a.
Activity Activity Activity Activity
Activity
Activity Base Usage Rate =Cost Activity Base Usage Rate =Cost
Fabrication mh mh
Assembly dlh dlh
Setup setups setups
Inspecting insp. insp.
Production scheduling prod. orders prod. orders
Purchasing purch. ord. purch. ord.
Total
Number of units
Activity cost per unit
Exercise 25-23
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Section:
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Stationary Bicycle
Treadmill
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a.
Activity Activity Activity Activity
Activity
Activity Base Usage Rate =Cost Activity Base Usage Rate =Cost
Fabrication 1,680 mh $22 36,960$ 1,070 mh $22 23,540$
Assembly 243 dlh $12 2,916 131 dlh $12 1,572
Stationary Bicycle
Treadmill
ON
Exercise 25-23
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Solution
Section:
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