Chapter 7: Exercises 3 7 and 11 Chapter 8: Exercises 2 6 a

Chapter 7: Exercises 3 7 and 11 Chapter 8: Exercises 2 6 and 9 E7-3 Moonbeam Company manufactures toasters. For the first 8 months of 2017 the company reported the following operating results while operating at 75% of plant capacity: E7-7 Riggs Company purchases sails and produces sailboats. It currently produces 1200 sailboats per year operating at normal capacity which is about 80% of full capacity. Riggs purchases sails at $250 each but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $100 for direct materials $80 for direct labor and $90 for overhead. The $90 overhead is based on $78000 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. It would cost me $270 to make the sails she says but only $250 to buy them. Should I continue buying them or have I missed something? Instructions E7-11 Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock Uhura and Sulu. Each of these products can be sold as is or each can be processed further and sold for a higher price. The company incurs joint costs of $180000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product. Instructions E8-2 Eckert Company is involved in producing and selling high-end golf equipment. The company has recently been involved in developing various types of laser guns to measure yardages on the golf course. One small laser gun called LittleLaser appears to have a very large potential market. Because of competition Eckert does not believe that it can charge more than $90 for LittleLaser. At this price Eckert believes it can sell 100000 of these laser guns. Eckert will require an investment of $8000000 to manufacture and the company wants an ROI of 20%. Instructions E8-6 Alma’s Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities a digital recording of the performance and a professional music producer/mixer. Anticipated annual volume is 1000 sessions. The company has invested $2352000 in the studio and expects a return on investment (ROI) of 20%. Budgeted costs for the coming year are as follows. Per Session Total Direct materials (CDs etc.) $20 Direct labor $400 Variable overhead $50 Fixed overhead $950000 Variable selling and administrative expenses $40 Fixed selling and administrative expenses $500000 Instructions E8-9 Rey Custom Electronics (RCE) sells and installs complete security computer audio and video systems for homes. On newly constructed homes it provides bids using timeand-material pricing. The following budgeted cost data are available. Time Charges Material Loading Charges Technicians’ wages and benefits $150000 Parts manager’s salary and benefits $34000 Office employee’s salary and benefits 30000 15000 Other overhead 15000 42000 Total budgeted costs $195000 $91000 The company has budgeted for 6250 hours of technician time during the coming year. It desires a $38 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2017 will be $700000. Instructions

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