Accounting Assignment
1. Punch Products, Inc. is considering purchasing a new production machine and has assembled the following information from two vendors of the machine that it is considering buying:
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A Products
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B Products
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Increase in revenue
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$ 45,200
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$ 52,000
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Increase in annual operating costs:
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Direct materials
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$ 12,000
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$ 12,000
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Direct labor
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$ 10,200
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$ 10,200
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Variable manufacturing overhead
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$ 23,100
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$ 25,200
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Fixed manufacturing overhead (including depreciation)
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$ 12,600
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$ 12,600
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Which of these costs are relevant? Using only the relevant costs, determine whether Punch Products, Inc. should buy the equipment from A Products or from B Products.
Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.
2. Magic Lawnmower Company assembles lawnmowers from a number of different parts. Some of those parts are manufactured by Magic Lawnmower and some of the parts are purchased from other companies. The vendor for the blades that Magic Lawnmower uses has just increased the price of blades to $10 per blade for the first 5,000 blades and $9 per blade for all blades ordered during the year in excess of 5,000. Magic Lawnmower expects to use 7,500 blades this year. Magic lawnmower can make the blades for the following unit costs:
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Direct materials
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$3.50
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Direct labor
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$1.75
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Variable manufacturing overhead
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$4.25
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Should Magic Lawnmower make the blades or continue to buy the blades from its vendor?
Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.
3. MOS Company sells and delivers appliances. The costs associated with maintaining a delivery truck each year are:
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Insurance
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$2,500
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Licenses
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$125
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Vehicle taxes
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$150
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Depreciation ($15,000/5 years)
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$3,000
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Gasoline
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$ 0.05/mile
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Tires
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$ 0.02/mile
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Repairs
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$ 0.01/mile
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A. Assume that MOS has a delivery truck that is driven for 60,000 miles in one year. Compute the average cost per mile of owning and operating that truck.
B. Assume that MOS decides not use the delivery truck and instead arranges for all deliveries that it has to make to be made by a commercial trucking company. (The state where MOS is located the payment of vehicle license and taxes even if the vehicle is not used.) What costs are relevant to a decision by MOS to use its truck for deliveries or to have a commercial trucking companies make deliveries?
Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.
4. The following information is provided by XYZ Corporation:
a. The manager of Department X is responsible for generating cash receipts and incurring costs so the corporation can make a profit. This manager is not responsible for decisions about what equipment to buy.
b. The manager of Department Y is responsible for operation of the call center where customers order products from the corporation.
c. Department Z produces one of the parts that is used to make the products that the corporation sells to consumers.
Classify each of these departments as a cost center, a profit center, or an investment center, and explain the classification that you assigned to each department.
Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.