# Acc350 Managerial Accounting: Week 5 Assignment (E25-10, E25-13, E25-15, E25-18, P25-34)

Acc350 Managerial Accounting
Week 5 Assignment (E25-10, E25-13, E25-15, E25-18, P25-34)

E25-10 Making special pricing decisions
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby-Cardz with a special order. The Hall of Fame wishes to purchase 57,000 baseball card packs for a special promotional campaign and offers \$0.41 per pack, a total of \$23,370.
Hobby-Cardz’s total production cost is \$0.61 per pack, as follows:
Variable costs:
Direct materials 0.13
Direct labor 0.06
Total cost 0.61
Hobby-Cardz has enough excess capacity to handle the special order.

Requirements
1. Prepare a differential analysis to determine whether Hobby-Cardz should accept the special sales order.
2. Now assume that the Hall of Fame wants special hologram baseball cards. Hobby-Cardz will spend \$5,900 to develop this hologram, which will be useless after the special order is completed. Should Hobby-Cardz accept the special order under these circumstances, assuming no change in the special pricing of \$0.41 per pack?

E25-13 Making dropping a product decisions
Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company accountants have prepared the following analysis to help make this decision:
MOVIE STREET
Income Statement
For the Year Ended December 31, 2014
Total Blu-ray Discs DVD Discs
Sales Revenue 432,000 305,000 127,000
Variable Costs 246,000 150,000 96,000
Contribution Margin 186,000 155,000 31,000
Fixed Costs:
Manufacturing 128,000 71,000 57,000
Selling and Administrative 67,000 52,000 15,000
Total Fixed Expenses 195,000 123,000 72,000
Operating Income (Loss) (9,000) 32,000 (41,000)
Total fixed costs will not change if the company stops selling DVDs.

Requirements
1. Prepare a differential analysis to show whether Movie Street should drop the DVD product line.
2. Will dropping DVDs add \$41,000 to operating income? Explain.

E25-15 Making product mix decisions
Lifemaster produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Lifemaster could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models is as follows:
Per Unit
Deluxe Regular
Sale Price 1,020 560
Costs:
Direct Material 300 90
Direct Labor 88 188
Variable Operating Expenses 111 65
Total Costs 901 477
Operating Income \$119 \$83
*allocated on the basis of machine hours

Requirements
1. What is the constraint?
2. Which model should Lifemaster produce? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.)
3. If Lifemaster should produce both models, compute the mix that will maximize operating income.

E25-18 Making outsourcing decisions
Fiber Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit:
Direct Material 9.00
Direct Labor 1.50