Fundamental Managerial Accounting ConceptsSixth Edition

1、Fundamental Managerial Accounting ConceptsThomas P. EdmondsBor-Yi TsayPhillip R. OldsSixth EditionLearning ObjectiveLO1Make appropriateoutsourcing decisions.6-2Cost per unit : $658,500 2,000 = $329.25Here is budgeted cost information for Premier, a company that produces printers. The company has eno

2、ugh capacity to produce additional printers, but is planning to produce to meet current demand.Exhibit 6.16-3Outsourcing DecisionsLets return to our Premier example. Recall that the unit cost per printer was $329.25. A supplier offers to sell an unlimited number of printers to Premier for $240 each.

3、 Should Premier accept this outsourcing offer?Step 1: Determine the production costs Premier can avoid if it elects to outsource printer production.Cost per unit = $459,300 2,000 = $229.656-4Outsourcing DecisionsStep 2:Compare the avoidable production costs with the cost ofbuying the product and sel

4、ect the lower-cost option.Premier should reject the outsourcing offer.6-5Outsourcing DecisionsOpportunity CostsIf Premier purchases the printers, it could use its manufacturing space for storing finished goods inventory. Premier is currently renting warehouse space at the cost of $40,000. Should Pre

5、mier continue to manufacture the printers?Management should purchase the printersbecause the price of $240 is below the cost of$249.65 when the opportunity cost is factored in.6-6Learning ObjectiveLO2Make appropriatesegment eliminationdecisions.6-7Segment Elimination DecisionsBusinesses are frequent

6、ly organized into operating units known as segments. Segment reports can be prepared for products, services, departments, branches, centers, offices, or divisions. These reports normally show segment revenues and costs. Lets look at a segment report for Premier Office Products that has divided its o

7、perations into three segments: (1) copiers, (2) computers, and (3) printers.6-8Should management eliminate the copier segment?6-9Segment Elimination Decisions6-10Should management eliminate the copier segment? To do so, they would lose $550,000 of projected revenues.6-11Segment Elimination Decisions

8、6-12Segment Elimination DecisionsThe corporate-level facility-sustaining costs will not be eliminated, but will be allocated to the remaining segments.6-136-14Learning ObjectiveLO3Make appropriateasset replacementdecisions.6-15Equipment Replacement DecisionsThe equipment replacement decision should be based on profitability rather than physical deterioration. Consider the following:6-16Equipment Replacement Decisions6-17Equipment Replacement Decisions6-18Equipment Replacement DecisionsOur analysis