Nama : Irga Ayudias Tantri

NIM : 12030124100011

Case 14-62
Bo Vonderweidt, the production manager for Sportway Corporation, had requested to have lunch
with the company president. Vonderweidt wanted to put forward his suggestion to add a new
product line. As they finished lunch, Meg Thomas, the company president, said, “I’ll give your
proposal some serious thought, Bo. I think you’re right about the increasing demand for
skateboards. What I’m not sure about is whether the skateboard line will be better for us than our
tackle boxes. Those have been our bread and butter the past few years.”
Vonderweidt responded with, “Let me get together with one of the controller’s people. We’ll run
a few numbers on this skateboard idea that I think will demonstrate the line’s potential.”
Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment
to large chain stores. About 60 percent of Sportway’s products are purchased from other companies
while the remainder of the products are manufactured by Sportway. The company has a Plastics
Department that is currently manufacturing molded fishing tackle boxes. Sportway is able to
manufacture and sell 8,000 tackle boxes annually, making full use of its direct-labor capacity at
available work stations. The selling price and costs associated with Sportway’s tackle boxes are as
follows:

Because Sportway’s sales manager believes the firm could sell 12,000 tackle boxes if it had
sufficient manufacturing capacity, the company has looked into the possibility of purchasing the
tackle boxes for distribution. Maple Products, a steady supplier of quality products, would be able
to provide up to 9,000 tackle boxes per year at a price of $68.00 per box delivered to Sportway’s
facility.
Bo Vonderweidt, Sportway’s production manager, has come to the conclusion that the company
could make better use of its Plastics Department by manufacturing skateboards. Vonderweidt has
a market study that indicates an expanding market for skateboards and a need for additional
suppliers. Vonderweidt believes that Sportway could expect to sell 17,500 skateboards annually at
a price of $45.00 per skateboard.
After his lunch with the company president, Vonderweidt worked out the following estimates with
the assistant controller.

In the Plastics Department, Sportway uses direct-labor hours as the application base for
manufacturing overhead. Included in the manufacturing overhead for the current year is $50,000
of factorywide, fixed manufacturing overhead that has been allocated to the Plastics Department.
For each unit of product that Sportway sells, regardless of whether the product has been purchased
or is manufactured by Sportway, there is an allocated $6.00 fixed overhead cost per unit for
distribution that is included in the selling and administrative cost for all products. Total selling and
administrative costs for the purchased tackle boxes would be $10.00 per unit.
Required:
In order to maximize the company’s profitability, prepare an analysis that will show which product
or products Sportway Corporation should manufacture or purchase
1. In order to maximize the company’s profitability, prepare an analysis that will show which
product or products Sportway Corporation should manufacture or purchase
Jawaban :

Calculation Manufacturing overhead per unit

* Tackle boxes:
Direct-labor hours : $18.75 ÷ $15.00 = 1.25 hours
Overhead per direct-labor hour : $12.50 ÷ 1.25 = $10.00
Capacity : 8,000 boxes x 1.25 = 10,000 hours
Total overhead : 10,000 hours x $10 per hour = $100,000
Total variable overhead : $100,000 – $50,000 = $50,000
Variable overhead per hour : $50,000 ÷ 10,000 = $5.00
Variable overhead per box : $5.00 x 1.25 = $6.25

* Skateboards:
Direct-labor hours : $7.50 ÷ $15.00 = 0.5 hours
Variable overhead : $5.00 x 0.5 = $2.50
 Calculation Selling and administrative cost
* Tackle boxes : $17.00 - $6.00 = $ 11.00
* Skateboards : $9.00 - $6.00 = $ 3.00

Purchased Manufactured
Tackle Tackle Skate-
Boxes Boxes boards
Selling price $ 86,00 $ 86,00 $ 45,00
Less:
 Manufacturing overhead (68.00) (17.00) (12.50)
 Direct labor — (18.75) (7.50)
 Manufacturing overhead* * — (6.25) (2.50)
 Selling and administrative cost  (4.00) (11.00)  (3.00)
Contribution margin $ 14,00 $ 33,00 $ 19,50

Direct-labor hours per unit — 1.25 0.5

Contribution per hour — $26.40 $39.00

Untuk memaksimalkan keuntungan perusahaan, Sportway Corporation harus membeli

9.000 kotak tackle dari Produk Maple untuk memproduksi 17.500 skateboard dan 1.000
kotak tackle. Bahan yang dibeli dan diproduksi ini dapat memaksimalkan kontribusi per
jam tenaga kerja langsung yang tersedia.

2. Calculate the improvement in Sportway’s total contribution margin if it adopts the optimal
strategy rather than continuing with the status quo.
Jawaban :

Item Quantit DLH per Total DLH Balance of DLH Unit Total
Total hours 10
Skateboards 17,5  0.50 8,75  1,250 $ 19.50 $341,250
Make boxes  1,000 1.25 1,25 — 33.00   33,000
Buy boxes  9,000 — — — 14.00  126,000
Total contribution $500,250
Less:
 Contribution from manufacturing 8,000 boxes (8,000 x $33.00)  264,000
Improvement in contribution margin $236,250

Case 14-63
Alberta Gauge Company, Ltd., a small manufacturing company in Calgary, Alberta, manufactures
three types of electrical gauges used in a variety of machinery. For many years the company has
been profitable and has operated at capacity. However, in the last two years, prices on all gauges
were reduced and selling expenses increased to meet competition and keep the plant operating at
capacity. Second-quarter results for the current year, which follow, typify recent experience.

Alice Carlo, the company’s president, is concerned about the results of the pricing, selling, and
production prices. After reviewing the second-quarter results, she asked her management staff to
consider the following three suggestions:
 Discontinue the R-gauge line immediately. R-gauges would not be returned to the product
line unless the problems with the gauge can be identified and resolved.
 Increase quarterly sales promotion by $100,000 on the Q-gauge product line in order to
increase sales volume by 15 percent
 Cut production on the E-gauge line by 50 percent, and cut the traceable advertising and
promotion for this line to $20,000 each quarter
Jason Sperry, the controller, suggested a more careful study of the financial relationships to
determine the possible effects on the company’s operating results of the president’s proposed
course of action. The president agreed and assigned JoAnn Brower, the assistant controller, to
prepare an analysis. Brower has gathered the following information
 All three gauges are manufactured with common equipment and facilities
 The selling and administrative expense is allocated to the three gauge lines based on
average sales volume over the past three years.
 Special selling expenses (primarily advertising, promotion, and shipping) are incurred for
each gauge as follows:

 The unit manufacturing costs for the three products are as follows:
 The unit sales prices for the three products are as follows:

 The company is manufacturing at capacity and is selling all the gauges it produces.
Required:
1. JoAnn Brower says that Alberta Gauge Company’s product-line income statement for the
second quarter is not suitable for analyzing proposals and making decisions such as the
ones suggested by Alice Carlo. Write a memo to Alberta Gauge’s president that addresses
the following points.
a. Explain why the product-line income statement as presented is not suitable for
analysis and decision making.
Jawaban :
Laporan laba rugi lini produk disajikan berdasarkan biaya penyerapan karena itu
tidak cocok dalam analisis dan pengambilan keputusan. Pernyataan tersebut tidak
membedakan antara biaya variabel dan biaya tetap, sehingga sulit untuk
menganalisis tentang dampak perubahan volume terhadap laba. Selain itu,
pernyataan tersebut tidak membedakan antara biaya yang terkait langsung (dapat
dilacak) ke lini produk dari biaya yang ditanggung bersama di antara semua produk.

b. Describe an alternative income-statement format that would be more suitable for

analysis and decision making, and explain why it is better
Jawaban :
Format laporan laba rugi alternatif lebih cocok untuk analisis dan pengambilan
keputusan karena akan menggabungkan pendekatan kontribusi. Beban akan
diklasifikasikan dalam hal variabilitas dan pengendalian seperti variabel
manufaktur , variabel penjualan dan administrasi yang langsung dapat dikendalikan
oleh segmen, tetap langsung dikendalikan oleh orang lain, dan common fixed. The
common fixed tidak akan dibebankan ke lini produk karena alokasi seperti itu akan
berubah-ubah. Pendekatan kontribusi lebih cocok untuk analisis dan pengambilan
keputusan karena ada pembebanan biaya yang berarti ke lini produk tersebut.
2. Use the operating data presented for Alberta Gauge Company and assume that the
president’s proposed course of action had been implemented at the beginning of the second
quarter. Then evaluate the president’s proposal by specifically responding to the following
points
a. Are each of the three suggestions cost-effective? Support your discussion with an
analysis that shows the net impact on income before taxes for each of the three
suggestions.
Jawaban :
Account E-Gauge Q-Gauge R-Gauge
Unit selling price $90 $200 $180
Unit variable costs
 Raw material $17 $31 $50
 Direct labor 20 40 60
 Variable manufacturing
30 45 60
  overhead
 Shipping expenses   4  10  10
  Total     71     126     180
Unit contribution margin $19 $ 74 $  0

Increase (decrease) in units*

 E-gauge: 10,000 x 50% x (5,000)
 Q-gauge: 8,000 x 15% x 1,200
 R-gauge: 5,000 x 100% x (5,000)
Increase (decrease) in total
$(95,000) $ 88,800 $     0
 contribution margin
Decrease (increase) in fixed costs   80,000 (100,000)  40,000
Increase (decrease) in segment
$(15,000) $(11,200) $40,000
 contribution

Jadi, yang disarankan dari R-gauge akan hemat biaya, tetapi saran yang berkaitan
dengan E-gauge dan Q-gauge tidak akan efektif dari segi biaya.

b. Was the president correct in proposing that the R-gauge line be eliminated? Explain
your answer
Jawaban :
Ya, karena Harga jual R-gauge hanya mencakup biaya variabel dan tidak
memberikan kontribusi apa pun pada biaya overhead pabrik atau biaya promosi.
Dengan demikian, R-gauge memiliki margin kontribusi nol.

c. Was the president correct in promoting the Q-gauge line rather than the E-gauge
line? Explain your answer
Jawaban :

*E-Gauge :
Unit contribution = $19.00
Contribution per direct-labor dollar = 0.95
 *Q-Gauge :
Unit contribution = $74.00
Contribution per direct-labor dollar = 1.85

Ya, karena margin kontribusi unit dan kontribusi per dolar tenaga kerja lebih besar
untuk Q-gauge namun penurunan promosi di E-gauge dan peningkatan promosi di
Q-gauge tidak menghasilkan kontribusi yang cukup untuk mengimbangi biaya
promosi

d. Does the proposed course of action make effective use of the company’s capacity?
Explain your answer.
Jawaban :
Tidak, tindakan yang diusulkan tidak menggunakan kapasitas secara efektif karena
peningkatan volume produksi sebesar 15% pada Q-gauge tidak memerlukan semua
kapasitas yang telah dilepaskan dengan menghentikan R-gauge atau mengurangi
E-gauge sebesar 50%

3. Are there any qualitative factors that Alberta Gauge Company’s management should
consider before it drops the R-gauge line? Explain your answer.
Jawaban :
Ya, faktor kualitatif yang harus dipertimbangkan manajemen sebelum memutuskan apakah
akan menghentikan jalur R-gauge adalah :
o Hubungan pelanggan. Penjualan E-gauge dan Q-gauge mungkin berkaitan dengan
penjualan R-gauge.
o Hubungan kerja. Mengurangi pekerjaan dapat menciptakan masalah tenaga kerja.