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Question 8 Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $6,600 from sales $200,000, variable costs $176,000, and fixed costs $30,600. If the Big Bart line is eliminated, $20,600 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Continue Eliminate Sales Variable costs Contribution margin Fixed costs Net Income / (Loss) $ $ The Big Bart product line should be Question 9 Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is: Materials Labor Variable overhead Fixed overhead $ 12,744 36,344 24,308 48,144 $121,540 Total Gruden also incurs 7% sales commission ($0.49) on each disc sold. McGee Corporation offers Gruden $4.90 per disc for 5,100 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $48,144 to $52,714 due to the purchase of a new imprinting machine. No sales commission will result from the special order. (a) Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues Materials Labor Variable overhead Fixed overhead Sales commissions Net income (b) Should Gruden accept the special order? Gruden should the special order. Question 10 Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $3.56 and $4.75, respectively. Normal production is 29,100 curtain rods per year. A supplier offers to make a pair of finials at a price of $13.46 per unit. If Pottery Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $40,400 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products. (a) Prepare the incremental analysis for the decision to make or buy the finials. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net Income Increase (Decrease) Direct materials Direct labor Variable overhead costs Fixed manufacturing costs Purchase price Total annual cost (b) Should Pottery Ranch buy the finials? . Pottery Ranch should the finials. L (c) Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $70,248? , income would by $

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