Answer:
additional revenue = $26,250
relevant costs:
direct materials = 350 x $82 = $28,700
direct labor = 525 x $15 = $7,875
setup hours = 1 x $5 = $5
inspection costs = 20 x $5 = $100
machining = 175 x $3 = $525
total relevant costs = $37,205
1) change in income if order is accepted:
total revenue - total relevant costs = $26,250 - $37,205 = -$10,955
the company will incur a loss of $10,955 if the order is approved.
2) if the cost of direct materials is decreased by $13 per unit = $13 x 350 = $4,550, and if direct labor can be reduced by 0.5 hours per unit = 175 hours (= 175 x $15 = $2,625) ⇒ total relevant costs will be lowered by $7,175.
It results in a $3,780 (= $10,955 - $7,175) loss if the special order is accepted.
To make both Site options equally appealing, Mark's utility for a $50,000 profit ought to be set at 0.78. Explanation: For an individual to be indifferent between two site choices, the utility levels for Site 1 and Site 2 need to align. The weighted utility for Site 2, based on good demand, is calculated by averaging, resulting in 0.5. For Site 1, the balance between Ux and a lower utility must sum to 0.5. Calculating Ux gives us a resultant of 0.78.
First, it is necessary to record the depreciation expenses for January, February, and March: Depreciation expense over the three months is calculated as ($42,000 - $5,000) x 3/60 = $1,850. As of April 1, the journal entries for the depreciation expense for January, February, and March shall reflect Dr Depreciation Expense 1,850 and Cr Accumulated Depreciation 1,850. Consequently, the book value of the truck becomes $12,400 - $1,850 = $10,550. 1) In the scenario where the truck sells for $12,000 on April 1, the entries will be: Dr Cash 12,000, Dr Accumulated Depreciation 31,450, Cr Gain from Sale 1,450, and Cr Truck 42,000. If it instead sells for $9,000, the entries will adjust to: Dr Cash 9,000, Dr Accumulated Depreciation 31,450, Dr Loss from Sale 1,550, and Cr Truck 42,000. 2) Any gain or loss from the truck's sale should be recorded on the income statement under gains or losses from asset sales. 3) If Swann adopts IFRS and there was a revaluation surplus recorded on the truck, upon selling it for $12,000 on April 1, the entries should show: Dr Cash 12,000, Dr Revaluation Surplus 4,000, Dr Loss from Sale 1,450, and Cr Truck 14,550.
