【正文】 ............................. 60,000 0 Variable overhead ................. 20,000 0 Setups ...................................... 3,600 0 Inspections ............................. 12,300 0 Materials handling ................. 8,000 0 Purchase cost ........................ 0 230,000 $ 243,900 $ 230,000 The oute now favors the purchase option. 3. In making this decision Golf2Go should consider such qualitative factors as the quality of the part, the reliability of the supplier, the effect of labor reductions on employee morale, the possibility of price increases in the future, and the effect on the overall strategic position of the firm. The strategic implications are particularly important. Does Golf2Go really want to reduce the level of backward integration? If Golf2Go is pursuing a cost leadership strategy, is purchasing the part the best way of reducing costs? Or should it first examine ways of reducing costs internally before making a purchase decision? It may be possible to reduce waste and inefficiency to the point where internal production is much better (from a cost reduction point of view) than external purchase. 4. The controller does have a point. Purchasing the part will affect a number of other activities such as purchasing, receiving, and paying bills. If these activities do not have unused capacity that can absorb the increased demands associated with the new part, then resource spending could increase and this should be factored into the analysis. An ABC system would tend to make this focus a natural oute and thus avoid the likelihood of missing any incremental costs. 409 18–7 1. Ine effect: Revenues ($35 14,000).......................................... $ 490,000 Direct materials ($20 14,000) ............................... (280,000) Direct labor ($15 10,500) ....................................... (157,500) Setups ($175 25) + ($8 50) ................................. (4,775) Inspection ($1 400)................................................. (400) Machining ($20 2,500) + ($3 7,000) .................. (71,000) Ine change .................................................. $ (23,675) The initial analysis favors rejecting the order because ine decreases by $23,675. 2. If machining had 7,500 hours of unused capacity, it would be unnecessary to acquire the additional 2,500 hours to deal with the order. This makes the fixed activity ponent irrelevant. The only increase in resource spending for the machining activity would be the variable amount of $21,000 ($3 7,000 hours). Thus, ine would increase by $26,325 ($50,000 – $23,675), making the special order profitable. 3. The setup activity’s 80 hours of unused capacity increases the benefit of accepting the order by $4,375 ($175 25). However, the unused machining capacity is still not sufficient to cover the order’s requirements and so the additional capacity must be acquired by leasing another machine—for $50,000 per year ($20 2,500). The order is still unacceptable, but with a loss of $19,300 instead of $23,675. (23,675 – 4,375 = 19,300) 410 18–8 1. Functionalbased statement: Smooth Crunchy Total Revenues ........................................... $ 5,000,000 $ 800,000 $ 5,800,000 Variable expenses: Direct materials ......................... (2,500,000) (480,000) (2,980,000) Direct labor................................. (500,000) (80,000) (580,000) Variable overheada................... (360,000) (90,000) (450,000) Contribution margin ........................ $ 1,640,000 $ 150,000 $ 1,790,000 Less: Direct fixed expenses .......... 200,000 60,000 260,000 Product margin .......................... $ 1,440,000 $ 90,000 $ 1,530,000 Common fixed expensesb ........................................................................ 567,500 Ine before taxes ........................................................................... $ 962,500 aOnly direct labor benefits and machine costs vary with direct labor hours. Why direct labor hours as driver for machine costs? Use two overhead rates as follows: Direct Labor Benefits $200,000 / 50,000 hours = $4/hr。 $200 250 (traceable fixed)。 ($100,000/2,000) 500 (Two steps can be reduced by dropping the Crunchy line。 students enjoy analyzing their own decisions, whether it is buying a car, moving from the dorm into an apartment, or buying a puppy. Sometimes, the application of the model leads to new insights into their problems. 5. Relevant costs and revenues are future costs and revenues that differ across alternatives. Depreciation on an existing asset represents an allocation of a past cost. Past costs are sunk costs and therefore seldom relevant. 6. A future cost that is not relevant is a future cost that does not differ across the alternatives being considered. For example, rent on a factory in a keepordrop decision is a future cost, but it will be there whether one of the factory’s products is dropped or kept. 7. Disagree. Relevant costs are just part of the overall tactical decision model. Strategic effects and other qualitative factors may affect the decision. The effect may be such that a highercost alternative may be chosen. 8. Yes, direct materials can be irrelevant. In a makeorbuy decision, any direct materials already in inventory are irrelevant. In a makeorbuy decision, the salary of the production supervisor would be fixed but relevant to the decision. Leasing equipment is relevant if it is a future cost that differs across alternatives. In most cases, this would not be a factor because it entails the acquisition of multiperiod capacity and really belongs to the capital expenditure decision domain. 9. The only role of past costs is predictive. They can be used to