# ACC 560 Week 5 Homework Chapter 7 and 8

Aug 8th, 2016
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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: a. Prepare an incremental analysis for the special order. E7-7 Riggs Company purchases sails and produces sailboats. It currently produces 1,200 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 \$78,000 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 some

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Chapter 7: Exercises 3, 7, and 11Chapter 8: Exercises 2, 6, and 9E7-3 Moonbeam Company manufactures toasters. For the first 8 months of 2017, thecompany reported the following operating results while operating at 75% of plantcapacity:Sales (350,000 units)Cost of goods soldGross profitOperating expensesNet income\$4,375,0002,600,0001,775,000840,000\$ 935,000Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80%variable and 20% fixed.In September, Moonbeam receives a special order for 15,000 toasters at \$7.60 eachfrom Luna Company of Ciudad Juarez. Acceptance of the order would result in anadditional \$3,000 of shipping costs but no increase in fixed costs.Instructionsa. Prepare an incremental analysis for the special order.Sales (350,000 units)Cost of goods soldunitGross ProfitOperating expensesNet income==\$4,375,000\$2,600,000 x 70% = 1,820,000 / 350000 = \$5.2 variable cost per===\$1,775,000\$840,000 x 80% = 672,000 = \$1.92 variable cost per unit\$935,000RevenuesCost of Goods SoldOperating ExpensesNet Income====15,000 x 7.615,000 x 5.215,000 x 1.924,200===114,00078,00028,800 + 3000 =31,800b. Should Moonbeam accept the special order? Why or why not?Moonbeam should accept the special order. This is because the special order results in an increase innet income.E7-7 Riggs Company purchases sails and produces sailboats. It currently produces1,200 sailboats per year, operating at normal capa

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