Instruction: Write your name on this questionnaire. Write all your answers on yellow sheets of paper. Submit your papers together with this questionnaire. 10 points each (over 50 points). Excess points will be a bonus.

1. SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 RecRobo’s is as follows.

CostDirect materials ($40 per robot) $ 800,000Direct labor ($30 per robot) 600,000Variable overhead ($6 per robot) 120,000Allocated fixed overhead ($25) 500,000Total $ 2,020,000

Sy Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $ 1,800,000.

Determine whether Sy Telc should accept this offer under each of the following independent assumptions. Show your solution.

(1) Assume that $300,000 of the fix overhead cost can be reduced (avoided).(2) Assume that none of the fixed overhead can be reduced (avoided).

2. Benson, Inc. produces three separate products from a common process costing $100,000. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period.

Sales Value Cost to Sales ValueAt Split-off Process After Further

__Point__ Further_ ProcessingProduct 12 $50,000 $100,000 $190,000Product 14 10,000 30,000 35,000Product 16 60,000 150,000 220,000

Instructions Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further.

3. Maggie Sherrer, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Poway Company’s six divisions. Maggie made the following presentation to Poway’s Board of Directors and suggested the Erie Division be eliminated. “If the Erie Division is eliminated,” she said, “our total profits would increase by $24,500.”

The Other Erie Five Divisions Division _ Total__

Sales $1,664,200 $100,000 $1,764,200Cost of goods sold 978,520 76,500 1,055,020Gross profit 685,680 23,500 709,180Operating expenses 527,940 48,000 575,940Net income $ 157,740 $ (24,500) $ 133,240

In the Erie Division, cost of goods sold is $60,000 variable and $16,500 fixed, and operating expenses are $25,000 variable and $23,000 fixed. None of the Erie Division’s fixed costs will be eliminated if the division is discontinued.

Is Maggie right about the Erie Division? Prepare a schedule to support your answer.

4. Patriot Company manufactures and sells three products: red, white, and blue. Their unit sales prices are $74 for red, $108 for white and $99 for blue. The per unit variable costs to manufacture and sell these products are $48 for red, $75 for white and $90 for blue. Their relative sales mix in units are 50%, 40% and 10% for red, white, and blue respectively. Annual fixed costs shared by all three products are $179,200. Determine the break-even point in sales units (roud up) and sales dollars of each individual product (two-decimal places).

5. Shol Co. produces and sells two products, T and ). It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 51,000 units of each product. Sales and costs for each product follow.

Product T Product OSales $2,040,000 $2,040,000Variable Costs 1,632,000 255,000Contribution Margin 408,000 1,785,000Fixed Costs 127,500 1,504,500Net Income 280,500 280,500

a. Compute the break-even sales in dollars for each product. b. Assume that the company expects sales of each product to increase to 65,000 units next year with no

change in unit prices, prepare a forecasted income statement for next year following the same format above.

6. Yenn Company manufactures toasters. For the first 8 months of 2009, the company reported the following operating results while operating at 75% of plant capacity.

Sales (400,000 units) $4,000,000Cost of Goods Sold 2,800,000Gross Profit 1,200,000Operating Expenses 900,000Net Income $ 300,000

Cost of goods sold was 70% variable and 30% fixed. Operating expenses were 60% variable and 40% fixed.

In September, Yenn Company receives a special order for 60,000 at $7 each from Cepeda Company at Mexico City. Acceptance of the order would result in $8,000 of shipping costs but no increase in fixed operating expenses. Should Yenn Company accept the special order? Why or why not? Show your solution.