【正文】 )1. Independent Practice Employee DifferenceOperating revenues $350,000 $110,000 $240,000Operating expenses 220,000 220,000Ine effects per year $130,000 $110,000 $ 20,000 Choose Independent PracticeRevenues $350,000Expenses:Outlay costs $220,000Opportunity cost of employee pensation 110,000 330,000Ine effects per year $ 20,000 Each tabulation produces the key difference of $20,000. As a general rule, we favor using the first tabulation when feasible. It offers a straightforward presentation of inflows and outflows under sharply stated alternatives.2. Choice as EmployeeRevenue $ 110,000Expenses:Outlay costs $ 0Opportunity cost of accounting practice 130,000 130,000Ine effects per year $ (20,000) If the employee alternative is selected, the key difference in favor of being a sole practitioner is again $20,000. Bridgeman is sacrificing $20,000 to avoid the risks of an independent practice.629 (1015 min.) Alternatives Under Consideration (1) (2) (1) (2) Sell, Rent, and Hold Invest in Bonds Present Home DifferenceRevenue $10,000* $ $10,000Less: Outlay cost 12,000 6,000 6,000Ine effects per year $ (2,000) $(6,000) $ 4,000*5% $200,000 Advantage of selling the home is $6,000 $2,000 = $4,000. Obviously, if rent is higher, the advantage decreases. The above analysis does not contain explicit opportunity costs. If opportunity costs were a part of the analysis, the following presentation applies (whereby the interest on investment in bonds is not listed as a separate alternative but is regarded as a forgone alternative): Alternative Chosen: Hold Present Home Opportunity cost $(10,000)Outlay cost 6,000Ine effects per year $ (4,000) As before, the advantage of selling the home and renting is $4,000. The opportunity cost of home ownership is 5% 200,000 = $10,000.630 (1520 min.) Opportunity cost is the maximum available contribution to profit forgone by using limited resources for a particular purpose. In this case, the opportunity cost of the machine when analyzing the alternative to produce 12oz. bottles of Juice Cocktails is $90,000, the larger of the $90,000 contribution margin from additional sales of the 100% Juices or the $75,000 proceeds from the sale of the machine. The $160,000 historical cost of the machine is a past cost and thus irrelevant. 631 (1520 min.) The first tabulation is probably easier to understand, but the choice of a tabulation is a matter of taste: (a) (b) (c) Expand Expand Rent to Laboratory Eye Gift Testing Clinic ShopRevenues $330,000 $500,000 $11,000Expenses 290,000 480,000 0Ine effects per year $ 40,000 $ 20,000 $11,000 Treating the gift shop as the forgone (rejected) alternative, the tabulation is: (a) (b) Expand Expand Laboratory Testing Eye Clinic Revenue $330,000 $500,000Expenses:Outlay costs $290,000 $480,000Opportunity cost, rent forgone 11,000 301,000 11,000 491,000Ine effects per year $ 29,000 $ 9,000 The numbers favor laboratory testing, which will generate a contribution to hospital ine that is $20,000 greater than the eye clinic39。s. The numbers have been analyzed correctly under both tabulations. Both answer the key query: What difference does it make? As a general rule, we prefer using the first tabulation. It is a straightforward presentation.632 (15 min.)1. It is easiest to analyze total costs, not unit costs. Make PurchaseDirect materials $400,000Avoidable overhead costs: Indirect labor 30,000 Supplies 20,000 Allocated occupancy cost 0Purchase cost $420,000Total relevant costs $450,000 $420,000 The difference in favor of purchasing is $450,000 $420,000 = $30,000.2. Because the quantitative difference is small, qualitative factors may dominate the decision. Companies using a justintime system need assurance of both quality and timeliness of supplies of materials, parts, and ponents. A small, local pany may not be reliable enough for Bose. In essence, Bose may be willing to invest $30,000, the quantitative advantage of purchasing, in order to have more control over the supply of the ponents. The division manager may have made the right decision for the wrong reason. He incorrectly ignored avoidable fixed costs, leading to a mistaken belief that making the ponents was less costly by $.20 per unit or $20,000 in total. The $50,000 of avoidable fixed costs makes the purchase option less costly by $30,000. If the manager39。s decision is to make the ponent, it should be because forgoing profits of $30,000 has a longrun qualitative benefit of more than $30,000, not because the bid is greater than the variable cost633 (2025 min.) Nantucket Nectars should make the bottles. Make Buy Per Per Total Bottle Total BottlePurchase cost $250,000 $.250Direct materials $80,000 $.080 Direct labor 30,000 .030 Variable overhead 60,000 .060 Avoidable fixed overhead 60,000 .060 Total relevant costs $230,000 $.230 $250,000 $.250Difference in favor of making $ 20,000 $.020 634 (1520 min.) Buy and Use Buy and Facilities Buy and Leave for Rent Facilities Other Out Make Idle Activities FacilitiesContribution from other activities $ 75 Rent revenue $ 55Relevant cost of bottles $(230) $(250) (250) (250)Net relevant costs $(230) $(250) $(175) $(195)Nantucket Nectars should buy the bottles and use the facilities for other activities.635 (20 min.)1. These warehouse stores attempt to maximize profits by cutting prices and increasing inventory turnover. Since profit is the product of contribution margin and unit sales, it can be affected