Tugas Akmen

INTEGRATIVE EXERCISE (CHAPTERS 11-14)

Special Sales Offer Relevant Analysis

NoFat manufactures one product, olestra and sells it to large potato chip manufacturers as the key in gradient in nonfat snack foods, including Ruffles, Lays, Doritos and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFat’s controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU) – a toxic waste cleanup company – offered to buy 10,000 pounds of olestra from NoFat during December for a price of $2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S Environmental Protection Agency. Allyson was excited, nothing that “This is another way to use our expensive olestra plant!”

            The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows:

            Variable costs per pound:

                        Direct materials                                                $1.00

                        Variable manufacturing overhead                    $0.75

                        Sales commissions                                           $0.50

                        Direct manufacturing labor                              $0.25

            Total fixed costs:

                        Advertising                                                      $  3,000

                        Customer hotline service                                 $  4,000

                        Machine set-ups                                               $40,000

                        Plant machinery lease                                      $12,000

In addition, Allyson met with several of NoFat’s key production managers and discovered the following information:

·         The special order could be produced without incurring any additional marketing or customer service costs.

·         NoFat owns the aging plant facility that it uses to manufacture olestra.

·         NoFat incurs costs to set up and clean its machines for each production run, or batch of olestra that it produces. The total set-up costs shown in the previous table represent the production of 20 batches during the year.

·         NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra.

·         PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the $1,000 cost of the inspection team.

Required:

1.      Conduct a relevant analysis of the special sales offer by calculating the following:

a.       The relevant revenues associated with the special sales offer

Price per pound number of pound

            = $2.20 x 10,000

= $22,000 of relevant (incremental) revenues from the special sale

b.      The relevant costs associated with the special sales offer

·         Relevant variable costs:

            Direct materials                                    $1.00

            Variable manufacturing overhead        $0.75

            Direct manufacturing labor                  $0.25

            Total                                        $2.00/pound

So $2.00/pound x 10,000 special sales pound = $20,000 relevant variable costs

·         Relevant fixed costs:

           Batch costs

= Cost per batch x number of batches required by special sales offer

= (Batch costs/number of batches) x (special sales units/number of units per batch)

= ($40,000/20) x [10,000/(100,000/20)]

= ($2,000 cost per batch) x (2 batches required by special sales offer)

= $4,000 batch cost for special sales offer

Plant inspection team cost if special sale is accepted = $1,000

Total relevant fixed cost = $4,000 + $1,000 = $5,000 relevant fixed costs

            Total Relevant Costs from Special Sales Offer: $20,000 + $5,000 = $25,000

c.       The relevant profit associated with the special sales offer

Relevant Revenues                  $22,000

Relevant Cost                          (25,000)

            Relevant profit             ($3,000)

2.      Based solely on financial factors, explain why NoFat should accept or reject PU’s special sales offer.

NoFat harus menolak tawaran penjualan khusus PU karena biaya yang relevan $ 25.000 lebih tinggi dari pendapatan yang relevan $ 22.000 yang ditawarkan oleh PU, sehingga membuat keuntungan yang relevan (atau tambahan) dari ($ 3.000) negatif.

3.      Describe at least one qualitative factor that NoFat should consider, in addition to the financial factors, in making its final decision regarding the acceptance or rejection of the special sales offer.

Faktor kualitatif berpotensi penting adalah reputasi produk, yaitu persepsi publik keselamatan Olestra ini. Secara khusus, beberapa (mungkin besar) persentase pelanggan NoFat ini mungkin hawatir bahwa Olestra bukan bahan yang aman untuk konsumsi manusia diberikan efektivitas yang tampak jelas dalam membersihkan situs limbah beracun.

Cost-Based Pricing

Assume for this question that NoFat rejected PU’s special sales offer because the $2.20 price suggested by PU was too low. In response to the rejection, PU asked NoFat to determine the price at which it would be willing to accept the special sales offer. For its regular sales, NoFat sets prices by marking up variable cost by 10%.

4.      If Allyson decides to use NoFat’s 10% mark-up pricing method to set the price for PU’s special sales offer.

a.       Calculate the price that NoFat would change PU for each pound of olestra.

Total revenue              = (Number of units × Variable cost per unit) × 1.10

                                    = [10,000 units × ($1.00 + $0.75 + $0.50 + $0.25)] × 1.10

                                    = (10,000 units × $2.50) × 1.10

                                                = $25,000 × 1.10

                                                = $27,500

           

The selling price per unit         = Total revenue from special sale/Number of units

                                                = $27,500/10,000

                                                = $2.75 selling price per unit

b.      Calculate the relevant profit that NoFat would earn if it set the special sales price by using its mark-up pricing method. (Hint: use the estimate of relevant costs that you calculated in response to Requirement 1b).

Relevant revenue                     $27,500

Relevant costs                          (25,000)

            Relevant profit             $ 2,500

c.       Explain why NoFat should accept or reject the special sales offer if it uses its mark-up pricing method to set the special sales price.

Ya, NoFat harus menerima tawara penjuaan khusus jika PU setuju untuk membayar harga sebesar $2.75 per unit, yang merupakan hasi dari NoFat’s cost-plus pricing formula.

Incorporating a Long-Term Horizon into the Decision Analysis

Assume for this question that Allyson’s relevant analysis reveals that NoFat would earn a positive relevant profit of $10,000 from the special sale (i.e., the special sales alternative). However, after conducting this traditional, short-term relevant analysis, Allyson wonders whether it might be more profitable over the long-term to downsize the company by reducing its manufacturing capacity (i.e., its plant machinery and plant facility). She is aware that downsizing requires a multiplayer time horizon because companies usually cannot increase or decrease fixed plant assets every year. Therefore, Allyson has dedicated to use 5 year time horizon in her long-term decision analysis. She is identified the following information regarding capacity downsizing (i.e., the downsizing alternative):

·         The plant facility consists of several buildings. If it chooses to downsize its capacity, NoFat can immediately sell of one building to an adjacent business for $30,000.

·         If it chooses to downsize its capacity, NoFat’s annual lease cost for plant machinery will decrease to $9,000.

Therefore, Allyson must choose between these two alternatives: Accept the special sales offer each year and earn a $10,000 relevant profit for each of the next 5 years or reject the special sales offer and downsize as described above.

5.      Assume that NoFat pays for all costs with cash. Also assume a 10% discount rate, a 5 year time horizon, and all cash flow occur at the end of the year. Using an NPV approach to discount future cash flows to present value.

a.       Calculate the NPV of accepting the special sale with the assumed positive relevant profit of $10,000 per year (i.e., the special sales alternative)

= Annual net cash inflow from special sales relevant profit    x          Discount factor

= $10,000        x          3.791

= $37,910 NPV of accepting special sales offer five-year time horizon

b.      Calculate the NPV of downsizing capacity as previously described. (i.e., the downsizing alternative)

(1)   Cash inflow from immediate sale of one building for $30,000 (no need to discount cash flow because it occurs at time 0)

(2)   Annual lease cost decreases from $12,000 to $9,000. This cost decrease of $3,000 represents an annual $3,000 increase inflow. The present value of this annuity equals:

= $3,000    x          3.791

= $11,371

     Total NPV of downsizing        = $30,000 + $11,373

                                                     = $41,373

c.       Based on the NPV of calculations a and b, identify and explain which of these two alternatives is best for NoFat to pursue in the long-term.

Berdasarkan perhitungan NPV di poin a dan b, downsizing alternative (poin b) menunjukkan long term alternative NoFat yang lebih baik untuk dipilih karena estimasi menunjukkan bahwa NPV positif yang lebih besar ($41,313) dari pada perhitungan alternative penjualan khusus pada poin a ($37,910)

PROBLEM 12-39 SETTING TRANSFER PRICES – MARKET PRICE VERSUS FULL COST

1.      Compute the firmwide contribution margin associated contribution margin associated with component Y34 and Model SC67. Also, compute the contribution margin earned by each division.

	Component Y34	Component SC67	Company
Sales	260,000	1,680,000	1,940,000
Variable Expenses	160,000	920,000	1,080,000
Contribution Margin	100,000	760,000	860,000

2.    Harga pasar $12 adalah harga minimum untuk Divisi Komponen dan harga maksimum untuk Divisi PSF.

3.    Manajer akan menghentikan produksi dan tidak akan membeli salah satu komponen.

    

4.    Semua 40.000 unit Komponen Y34 akan dijual secara eksternal di pasar dengan harga $ 12 per unit.

5.    Penjualan $480.000 biaya Variabel marjin 160.000. Kontribusi $ 320.000 kontribusi margin berkurang oleh $540.000. Cam membuat keputusan yang salah.

PROBLEM 13-43 ACCEPT OR REJECT A SPECIAL ORDER

1.    Steve harus mempertimbangkan menjual bagian untuk $ 1.85 karena laba divisinya ini akan meningkat $12.800:

	Accept	Reject
Revenues (2 x $1.85 x 8,000)	$29,600	$0
Variable Expenses	16,800	0
Total	$12,800	$0

Pat’s divisional profits would increase by$18,400:

	Accept	Reject
Revenues ($32 x 8,000)	$256,000	$0
Variable Expenses:
Direct Material ($17 x 8,000)	(136,000)	0
Direct Labor ($7 x 8,000)	(56,000)	0
Variable Overhead ($2 x 8,000)	(16,000)	0
Component (2 x $1.85 x 8,000)	(29,600)	0
Total	$18,400	$0

2.    Pat harus menerima harga $ 2. Harga ini akan meningkatkan biaya komponen dari $ 29.600 untuk $ 32.000 (2 x $ 2 x 8.000) dan menghasilkan manfaat tambahan dari $ 16.000 ($ 18.400 - $ 2.400). Divisi Steve akan melihat peningkatan laba dari $ 15.200 (8.000 unit x 2 komponen per unit x $ 0,95 marjin kontribusi per komponen).

3.    Ya. Pada harga penuh, total biaya komponen adalah $ 36.800 (2 x $ 2,30 x 8000), meningkat $ 7,200 (2 x 8.000 x 0,45) atas penawaran asli. Ini masih menyisakan peningkatan keuntungan dari $ 11.200 ($ 18.400 - $ 7.200).