Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 239 views

    Chapter 20 - Weygandt Financial and Managerial Accounting, 3e Challenge Exercises

    Uploaded by

    Tien Thanh Dang
    This document contains two challenge exercises involving incremental analysis and product line profitability. CE 20-1 involves analyzing a special order for Conklan Company and determining if it should be accepted. CE 20-2 involves analyzing the profitability of Safe and Secure Inc.'s three product lines and determining if one line should be discontinued. Instructions are provided for incremental analyses and calculations to determine the impact on profitability.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Chapter 20 - Weygandt Financial and Managerial Accounting, 3e Challenge Exercises

    Uploaded by

    Tien Thanh Dang
    239 views2 pages
    This document contains two challenge exercises involving incremental analysis and product line profitability. CE 20-1 involves analyzing a special order for Conklan Company and determining if it should be accepted. CE 20-2 involves analyzing the profitability of Safe and Secure Inc.'s three product lines and determining if one line should be discontinued. Instructions are provided for incremental analyses and calculations to determine the impact on profitability.

    Original Title

    ch20.docx

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document contains two challenge exercises involving incremental analysis and product line profitability. CE 20-1 involves analyzing a special order for Conklan Company and determining if it should be accepted. CE 20-2 involves analyzing the profitability of Safe and Secure Inc.'s three product lines and determining if one line should be discontinued. Instructions are provided for incremental analyses and calculations to determine the impact on profitability.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    239 views2 pages

    Chapter 20 - Weygandt Financial and Managerial Accounting, 3e Challenge Exercises

    Uploaded by

    Tien Thanh Dang
    This document contains two challenge exercises involving incremental analysis and product line profitability. CE 20-1 involves analyzing a special order for Conklan Company and determining if it should be accepted. CE 20-2 involves analyzing the profitability of Safe and Secure Inc.'s three product lines and determining if one line should be discontinued. Instructions are provided for incremental analyses and calculations to determine the impact on profitability.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Chapter 20 – Weygandt Financial and Managerial Accounting, 3e

    Challenge Exercises

    CE 20-1
    Conklan Company manufactures outdoor fireplaces. For the first 9 months of 2020, the
    company reported the following operating results while operating at 80% of plant capacity:

    Sales (75,000 units) $6,750,000


    Cost of goods sold 4,875,000
    Gross profit 1,875,000
    Operating expenses 750,000
    Net income $1,125,000

    Cost of goods sold was 80% variable and 20% fixed; operating expenses were 70% variable
    and 30% fixed.

    In October, Conklan Company receives a special order for 4,000 fireplaces at $62 each from
    Langston’s Landscape Company. Acceptance of the order would result in an additional $7,000
    of shipping costs but no increase in fixed operating expenses.

    Instructions
    (a) Prepare an incremental analysis for the special order.
    (b) Should Conklan Company accept the special order? Why or why not?
    (c) Before Conklan could give Langston’s Landscape Company an answer, they received a
    special order from Benson Building & Supply for 15,000 fireplaces. Benson is willing to
    pay $65 per fireplace but they want a special design imbedded into the fireplace that
    increases cost of goods sold by $67,500. The special design also requires the purchase
    of a part that costs $5,000 and will have no future use for Conklan Company. Benson
    Building & Supply will pick up the fireplaces so no shipping costs are involved. Due to
    capacity limitations, Conklan cannot accept both special orders. Which order should be
    accepted? Document your decision by preparing an incremental analysis for Benson’s
    order.
    CE 20-2

    Safe and Secure, Inc. produces three models of home security systems. Information on the
    three products is given below:

    Assurance Decoder Burglar Beware

    Sales $450,000 $750,000 $300,000


    Variable expenses 225,000 300,000 217,500
    Contribution margin 225,000 450,000 82,500
    Fixed expenses 180,000 345,000 142,500
    Net income $ 45,000 $105,000 $(60,000)

    Fixed expenses consist of $450,000 of common costs allocated to the three products based on
    relative sales, and additional fixed costs of $45,000 (Assurance), $120,000 (Decoder), and
    $52,500 (Burglar Beware). The common costs will be incurred regardless of how many models
    are produced. The other fixed expenses would be eliminated if a model is phased out.

    Matt Dillon, an executive with the company with extensive law enforcement background, feels
    that the Burglar Beware line should be discontinued to increase the company’s net income.

    Instructions
    (a) Compute current net income for Safe and Secure, Inc.
    (b) Compute net income by product line and in total for Safe and Secure, Inc., if the
    company discontinues the Burglar Beware product line. (Hint: Allocate the $450,000
    common costs to the two remaining product lines based on their relative sales.)
    (c) Should Safe and Secure, Inc., eliminate the Burglar Beware product line? Why or why
    not?
    (d) Assume instead that fixed expenses consist of $150,000 of common costs allocated to
    the three products equally, and additional fixed costs of $130,000 (Assurance), $295,000
    (Decoder), and $92,500 (Burglar Beware). The common costs will be incurred
    regardless of how many models are produced. The other fixed expenses would be
    eliminated if a model is phased out. Compute net income by product line and in total for
    Safe and Secure, Inc., if the company discontinues Burglar Beware product line. Should
    Safe and Secure, Inc., eliminate the Burglar Beware product line? Why or why not?

    You might also like