UNIVERSITAS INDONESIA

AKUNTANSI MANAJEMEN DAN BIAYA

Nama : Rahmi Amelia
NPM : 1506774283

FAKULTAS EKONOMI DAN BISNIS

MAGISTER AKUNTANSI PROGRAM PROFESI AKUNTANSI
JAKARTA
2015/2016

CHAPTER 17
Problem 17.24 (KEEP-OR-DROP FOR SERVICE FIRM, COMPLEMENTARY
EFFECTS, TRADITIONAL ANALYSIS)
Diketahui :
Sales
Less : Variable Expenses
Contribution Margin
Less : Direct Fixed Expense
Segment Margin
Less : Common Fixed Expenses
(Allocated)
Operating Income (Loss)

Property Insurance

Automobile Insurance

$4.200.000

$12.000.000

3.830.000

9.600.000

$ 370.000

$ 2.400.000

400.000

500.000

$ (30.000)

$ 1.900.000

100.000

200.000

$(130.000)

$1.700.000

Note : If propety insurance is dropped, sales of automobile insurance will dropped,

sales of automobile insurance will drop by 12%

Required :
1. If Devern Assurance Company drops property insurance, by how much will income
increase or decrease? Provide supporting computations
Answer :

Sales

Keep

Drop

$16.200.000

$10.560.000

13.430.000

8.448.000

Contribution Margin

$ 370.000

$ 2.112.000

900.000

500.000

$ 1.870.000

$ 1.612.000

Less : Variable Expenses

Less : Direct Fixed Expensec

Segment Margin
a

Sales : Keep = Sales Property Insurance + Sales Automobile Insurance

Drop = 12% of $12.000.000
b
Variable Expenses :
Keep = Var. Exp Property Insurance + Var. Exp Automobile Insurance
Drop = 12% of $9.600.000
c
Direct Fixed Expense : Keep = Direct Fixed Expense Property Insurance + Direct
Fixed Expense Automobile Insurance
If Devern Assurance Company drops property insurance, so sales of automobile
insurance will drop by 12%. Sales, variable expenses and contribution from automobile
insurance will decrease, but direct fixed expense will unchanged.
Income will decrease amount $1.870.000 - $1.612.000 = $258.000 if Devern
Assurance Company drops property insurance. So, Devern Assurance Company must not to
drop property insurance, but should continue to sell property insurance.
2.

Assume that dropping all advertising for the property insurance line and increasing the
corporate advertising budget by $450.000 will increase sales of property insurance by

10% and automobile insurance by 8%. Prepare a segmented income statement that
reflects the effects of increased advertising. Should advertising be increased?
Answer :

Sales

Property Insurance

Automobile Insurance

TOTAL

$4.620.000

$12.960.000

$17.580.000

4.213.000

10.368.000

14.581.000

Contribution Margin
Less : Direct Fixed
Expensec
Segment Margin
Less : Common Fixed
Expensesd
Operating Income

$ 407.000

$ 2.592.000

$ 2.999.000

500.000

500.000

$ 407.000

$ 2.092.000

$ 2.499.000

Less : Variable Expenses

750.000
$ 1.749.000

Because sales of property insurance increase by 10% and automobile insurance

increase by 8%, so :
a
Sales : Property Insurance = 10% of 4.200.000
Automobile Insurance = 8% of 12.000.000
b
Variable Expenses : Property Insurance = 10% of 3.830.000
Automobile Insurance = 8% of 9.600.000
c
Direct Fixed Expense : Property Insurance = 0
d
Common Fixed Expenses : Increase advertising budget ($450.000) + Common
Fixed Cost PropertyInsurance ($100.000) & Common
Fixed Cost Automobile Insurance ($300.000)
The advertising must be increase as income would increase :
= $1.749.000 ($1.700.000 $130.000)
= $179.000
Problem 17.25 (SPECIAL ORDER, TRADITIONAL ANALYSI)
Diketahui :
Join (Common) Cost : $92.500
Unit Production : Refined Oil = 30.000 gallons and Top Quality Oil = 15.000 gallons
Processing cost beyond the split-off point :
Refined Oil
= $2,40
Top Quality Oil = $1,95
Price : Refined Oil = $4,25 per gallon, Top Quality Oil = $8,30 per gallon
Order from MangiareBuono Supermarket = 30.000 gallons, $8 per gallon
If accept the order will save $0,23 of Top Quality Oil
Additional sales of Refined Oil take price of $3,10 per gallon

Required :
1. What is the profit normally earned on one production run of Refined Oil and Top Quality
Oil?
Answer :

Revenues

Refined Oil

Top Quality Oil

TOTAL

$127.500

$124.500

$252.000

72.000

29.250

101.250

Contribution Margin

$ 55.000

$ 95.250

$ 150.750

Less : Variable Expenses

Less : Joint Cost

92.500

Operating Income

$ 58.250

Revenues : Unit Production x Price per gallon

Refined Oil = 30.000 x $4,25
Top Quality Oil = 15.000 x $8,30
b
Variable Expenses : Refined Oil = 30.000 x $2,40
Top Quality Oil = 15.000 x $1,95
2.

Should Fiorello accept the special order? Explain

Answer :

Revenues

Refined Oil

Top Quality Oil

TOTAL

$186.000

$240.000

$426.000

144.000

51.600

195.600

Contribution Margin

$ 42.000

$188.400

$230.400

Less : Variable Expenses

Less : Joint Cost

185.000

Operating Income

$ 45.400

If Fiorello accept the spesial order, Fiorello must manufacture two additional
standar production runs as order :
Top Quality Oil = 2 x 15.000 = 30.000 gallons (MangiareBuonos order)
Refined Oil = 2 x 30.000 = 60.000 gallons
a

Revenues : Unit Production x Price per gallon

Refined Oil = 60.000 x $3,10
Top Quality Oil = 30.000 x $8
b
Variable Expenses : Refined Oil = 60.000 x $2,40
Top Quality Oil = 30.000 x ($1,95 - $0,23)
So, answer the question that should Fiorello accept the spesial order? The answer
is yes, the special order will make income result $45.400.

Problem 17.29 (SELL OR PROCESS FURTHER)

Diketahui :
The purchased chemical are blended for two to three hours and heated for 15 minutes
The results of the process are two seperate ingredients, PR1 and PR2
For every 4.300 gallons of chemical used, 2.000 gallons of each pain relieve are
produced
The selling price : PR1 = $34 per gallon, PR2 = $45 per gallon
The costs to produce one batch (2.000 gallons of each container) :
Chemical

$23.400

Direct Labor

9.000

Catalyst

3.600

Overhead

8.000

The pain relieve are bottle in 5 gallon plastic containers and shipped
The cost of each container = $12,10
The revenue received tablet oer case = $13,50, with 8 cases produced by every gallon
of PR1
The cost process into tablet : PR1 = $11,00; Packaging Cost = $5,16 per case and
shipping cost =$1,68 per case

Required :
1. Should Pharmaco sell PR1 at split-off, or should PR1 be processed and sold at tablet?
Answer :
For 2000
gallons
Revenuesa
Containers

Shipping

Process Further

Sell at split-off

$216.000

$68.000

Differential Amount to
Processs Further
$148.000

(840)

840

(26.880)

(200)

(26.680)

Processing

(22.000)

(22.000)

Packaging

(82.560)

(82.560)

TOTAL

$ 84.560

$66.960

$ 17.600

Revenues : Process Further = $13,50 x (8 case x 2.000 gallons)

Sell at split-off = $34 x 2.000 gallons
b
Containers : Process Further = 0
Sell at split-off = $2,10 x (2.000/5)
c
Shipping : Process Further = $1,68 x (8 case x 2.000 gallons)
Sell at split-off = $0,50 x (2.000/5)
d
Processing : Process Further = $11,00 x 2.000 gallons
e
Packaging : Process Further = $5,16 x (8 x 2.000)
So, the conclusion is Pharmaco should process the pain reliever further.

2.

If Pharmaco normally sells 26.000 gallons of PR1 per year, what will be the difference in
profits if PR1 is processed further?

Answer :
Difference in profits if PR1 is processed further :
Additional Income per gallon = $17.000 / 2.000
= $8,80
Additional Income = $8,80 x 26.000
= $228.800
Problem 17.31 (MAKE OR BUY, TRADITIONAL ANALYSIS)
Diketahui :
Morrill Company produces two different types of gauge : density and thickness
Density Gauge

Thickness Gauge

$150.000

$80.000

$230.000

80.000

46.000

126.000

$ 70.000

$34.000

$104.000

20.000

38.000

58.000

$ 50.000

$(4.000)

$ 46.000

Sales

Less : Variable Expenses

Contribution Margin
Less : Direct Fixed
Expenses*
Segment Margin
Less : Common Fixed
Expenses
Operating Income

TOTAL

30.000
$ 16.000

* Includes depreciations
Density Gauge uses a subassembly that is produced from an external supllier : $25 per
unit. 2.000 subassemblies are purchased each quarter
Unit-level variable manufacturing costs are as follows :
Direct Materials

$2

Direct Labor

Variable Overhead

Two Alternative to supply the productive capacit for the subassembly

1. Lease the needed space and equipment at a cost $27.000 per quarter for the space
and $10.000 per quarter for a supervisor
2. Drop the thickness gauge. The direct fixed expenses, including supervision, would
be $38.000, $8.000 of which is depreciation on equipment.
Required :
1. Should Morril Company make or buy the subassembly? If it makes the subassembly,
whic alternative shoud be chosen? Explain and provide supporting computations
Answer :
Cost Item

Lease and Make

Purchase

$50.000

14.000

Lease Expenses

27.000

Supervisor Salary

10.000

$51.000

50.000

Variable Manufacturing Costs

TOTAL RELEVANT COST

Buy

Variable Manufacturing Costs : $7,00 x 2.000 = $14.000

DROP THICKNESS
GAUGE AND MAKE
$

Purchase Cost
Variable Manufacturing Costs

14.000

Lost Contribution Margin

34.000

TOTAL RELEVANT COST

$48.000

The direct fixed expenses are the same accross all alternative
Best alternative : Drop the thickness gauge and the subassembly

2. Suppose that dropping the thickness gauge will decrease sales if the density gauge by
10%. What effect does this have on the decision?
Answer :
Complementary effect analysis :
MAKE
BUY
Lost sales for density gaugea

$15.000

Cost of making componentb

12.600

Reduction of other variable costsc

(3.000)

Lost contribution margin

34.000

50.000

$58.600

$50.000

Purchase Costd
TOTAL RELEVANT COST

Lost sales for density gauge : 0,10 x $150.000

Cost of making component : (0,90 x 2.000) x $7,00
c
Reduction of other variable costs : 0,10 x ($80.000 - $50.000), since sales decrease
by 10% if the component is manufactured, other variable costs will reduce
proportionally
d
If choose the buy alternative, theres no reduction in sales and the same number of
components will be needed
b

The correct decision = to keep the thickness gauge and buy the components

3. Assume that dropping the thickness gauge decreases sales if the density gauge by 10%
and that 2.000 subassemblies are required per quarter. As before, assume there are no
ending inventories of subassemblies and that all units produced are sold. Assume also
that the per-unit sales price and variable costs are the same as in Requirement 1. Include
the leasing alternative in your consideration. Now, what is the correct decision?
Answer :

Lease and Make

Variable manufacturing costs

Buy

$19.600

Lease Expenses

27.000

Supervisor Salary

10.000

70.000

$56.600

$70.000

Purchase Costa
TOTAL RELEVANT COST
a

Purchase Cost = $25 x 2.800

Lost sales for density gauge

Drop Thickness
Gauge and Make
$15.000

Variable manufacturing costsa

17.640

Reduction of other variable costsb

(1.000)

Lost contribution margin

34.000

Purchase Cost
TOTAL RELEVANT COSTS
a

0
$65.640

Variable manufacturing costs = $0,70 x (0,9 x 2.800)

Reduction of other variable costs = 0,10 x ($80.000-$70.000)

So, the answer is the corret decision = to lease and make the component