rs07021 Print Preview
property insurance by 10 percent and automobile insurance by 8 percent
Prepare a segmented income statement that reflects the effect of increased
advertising. Should advertising be increased?
Problem 17.25
Special Order, Traditional Analysis
Objective 2 - Define the concept of relevant costs and revenues.4 - Apply the
tactical decision-making concepts in a variety of business situations.
Fiorello Company manufactures two types of cold-
pressed olive oil, Refined Oil and Top Quality Oil, out of
a joint process. The joint (common) costs incurred are
{$92,500 for a standard production run that generates 30,000 gallons of
Refined Oil and 15,000 gallons of Top Quality Oil. Additional processing costs
beyond the split-off point are $2.40 per gallon for Refined Oil and $1.95 per
gallon for Top Quality Oil. Refined Oil sells for $4.25 per gallon, while Top
Quality Oil sells for $8.30 per gallon.
2cMA
MangiareBuono, a supermarket chain, has asked Fiorello to supply it with
30,000 gallons of Top Quality Oil at a price of $8 per gallon. MangiareBuono
plans to have the oil bottled in 16-ounce bottles with its own MangiareBuono
label.
If Fiorello accepts the order, it will save $0.23 per gallon in packaging of Top
Quality Oil. There is sufficient excess capacity for the order, However, the
market for Refined Oil is saturated, and any additional sales of Refined Oil
would take place at a price of $3.10 per gallon. Assume that no significant
non-unit-level activity costs are incurred
Required:
1. What is the profit normally earned on one production run of Refined Oil and
Top Quality Oil?
2. Should Fiorello accept the special order? Explain. (CMA adapted)
Problem 17.26
Resource Usage, Special Order
hitpsting.cengage.com/staticnbi/evolindex him! eISBN=97813059707248id=1874562498snapehotkd=5246408dockAppUid=10'&nbId=5246408
ana