BMGT 321 Chapter 11 Homework

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11-16 Disposal of assets.

Answer the following questions.
1. A company has an inventory of 1,250 assorted parts for a line of missiles that has been discontinued. The inventory cost is $76,000. The parts can be either (a) remachined at total additional costs of $26,500 and then sold for $33,500 or (b) sold as scrap for $2,500. Which action is more profitable? Show your calculations.
2. A truck, costing $100,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $18,000 cash and replaced with a similar truck costing $103,000 or (b) rebuilt for …show more content…

The company normally charges $150 per medal. Cost information for the current activity level is as follows:

Gold Plus has just received a special one-time-only order for 1,000 medals at $100 per medal. Accepting the special order would not affect the company’s regular business. Gold Plus makes medals for its existing customers in batch sizes of 50 medals (200 batches × 50 medals per batch = 10,000 medals). The special order requires Gold Plus to make the medals in 25 batches of 40 medals.

Required:
1. Should Gold Plus accept this special order? Show your calculations.
2. Suppose plant capacity were only 10,500 medals instead of 11,000 medals each month. The special order must either be taken in full or be rejected completely. Should Gold Plus accept the special order? Show your calculations.
3. As in requirement 1, assume that monthly capacity is 11,000 medals. Gold Plus is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $10 in the month in which the special order is being filled. They would argue that Gold Plus’s capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should Gold Plus accept the special order under these conditions? Show your calculations.

11-22 Relevant costs, contribution margin, product emphasis.

The Snack Shack is a take-out food store at a popular beach resort. Susan Sexton,