Portsmouth Company Makes Upholstered Furniture

Proper name: Chapter thirteen Practice Problems

EXERCISE thirteen–14 Identification of

Relevant Costs LO13–i

Kristen Lu purchased a used automobile for $8,000 at

the beginning of last year and incurred the following

operating costs:

Depreciation ($viii,000 ÷ v years) $1,600

Insurance $1,200

Garage rent $360

Motorcar tax and license $40

Variable operating cost $0.14 per mile

The variable operating cost consists of gasoline, oil,

tires, principaltenance, and repairs. Kristen estimates that,

at her current ratdue east of usage, the machine will accept zero resale

value in five years, so the annual straight-line

depreciation is $1,600. The car is thousandept in a garage for a

monthly feaste.

Required:

1. Kristen drove the car 10,000 miles last year.

Compute the averageast price per mile of owning and

operating the auto.

ii. Kristen is unsureastward about whether she should use her

ain car or reastwardnt a automobile to get on an extended cross-

country trip for two weeks during jump break.

What costs above are relevant inorthward this determination?

Explicate.

3. Kristen is thinking well-nigh buying an expensive due southports

machine to replace the auto she bought last year. She

would drivdue east the same number of miles regardless of

which car she owns and would rent the same

parking space. The sports car'due south variable operating

costs would exist roughly the same as the variable

operating costs of her old car. However, her

insurance and auto tax and license costs

would get upwardly. Westwardhat costs are relevant in estimating

the incremental cost of owning the moreastward expensive

automobile? Explain.

EXERCISE 13–4 Special Order

Conclusion LO13–4

Imperial Jewelers manufactures and sells a golden bracelet

for $189.95. The company's bookkeeping southwardystem says that

the unit of measurement product cost for this bracelet is $149.00 equally

shown beneath:

Directly materials $ 84.00

Direct labor 45.00

Manufacturing overhead 20.00

Unit product cost $149.00

The members of a wedding party have approached

Purple Jewelers about buying 20 of these gilded

bracelets for the discounted price of $169.95 each. The

membersouth of the wedding party would likeastward special

filigree applied to the bracelets that would increase the

straight materials cost per bracelet by $two.00. Imperial

Jewelers would also have to purchase a special tool for $250

to apply the filigreastwarde to the bracelets. The special tool

would have no other use once the special social club is

completed.

To analyze this special guild opportunity, Imperial

Jewelersouth has determined that most of its manufacturing

overhead is fixed and unaffected past variations in how

much jewelry is produced in any given flow. However,

$iv.00 of the overhead is variable with respect to the

number of bracelets produced. The company also

believes tchapeau accepting this order would have no effect

on its ability to produce and sell jewelry to other

customers. Furthermore, the company could fulfill the

wedding political party'south society using its existing manufacturing

capacity.

Required:

1. What is the financial advantage (disadvantage) of

accepting the special order from the wedding

political party?

2. Should the company accept the due southpecial order?

Chapter 13 Practice Problems - 22U Managerial Accounting – Teeter – Garrison 17e – Page 1 of 5

Portsmouth Company Makes Upholstered Furniture,

Source: https://www.studocu.com/en-us/document/american-university-usa/management-accounting/chapter-13-practice-problems/28627893

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