Question

The original questions are (i've already completed them)...

CD7 EXCELTutorial

CURRENT DESIGNS

Current Designs faces anumber of important decisions that require incremental analysis.Consider each

of the following situationsindependently.

Situation 1

Recently, Mike Cichanowski,owner and CEO of Current Designs, received a phone call from thepresident

of a brewing company. He wascalling to inquire about the possibility of Current Designsproducing "floating

coolers" for a promotion hiscompany was planning. These coolers resemble a kayak but are aboutone-third

the size. They are used tofloat food and beverages while paddling down the river on a weekendleisure trip.

The company would be interestin purchasing 100 coolers for the upcoming summer. It is willing topay $250

per cooler. The brewingcompany would pick up the coolers upon completion of theorder.

Mikemet with Diane Buswell, controller, to identify how much it wouldcost Current Designs to produce

the coolers. After carefulanalysis, the following costs were identified.

Direct materials

$80/unit

Variable overhead

$20/unit

Direct labor

$60/unit

Fixed overhead

$1,000

Current Designs would be ableto modify an existing mold to produce the coolers. The cost ofthese

modifications would beapproximately $2,000.

Instructions

(a)

Prepare an incremental analysis to determinewhether Current Designs should accept this special order to

produce the coolers.

(b)

Discuss additonal factors that Mike and Dianeshould consider if Current Designs is currently operating at

full capacity.

Situation 2

Current Designs is alwaysworking to identify ways to increase efficiency while becoming moreenvironmentally

conscious. During a recentbrainstorming session, one employee suggested to Diane Buswell,controller, that the

company should considerreplacing the current rotomold oven as a way to realize savingsfrom reduced energy

consumption. The ovenoperates on natural gas, using 17,000 therms of natural gas for anentire year. A new,

energy-efficient rotomoldoven would operate on 15,000 therms of natural gas for an entireyear. After seeking out

price quotes from a fewsuppliers, Diane determined that it would cost approximately$250,000 to purchase a new,

energy-efficient rotomoldoven. She determines that the expected useful life of the new ovenwould be 10 years, and

it would have no salvagevalue at the end of its useful life. Current Designs would be ableto sell the current oven for

$10,000

Instructions

(a)

Prepare an incremental analysis to determine ifCurrent Designs should purchase the new rotomold oven,

assuming that the average price for natural gasover the next 10 years will be $0.65 per therm.

(b)

Diane is concerned that natural gas prices mightincrease at a faster rate over the next 10 years. If thecompany

projects that the average natural gas price of thenext 10 years could be as high as $0.85 per therm, discuss

how that might change your conclusion in (a).

I need help with the part below!

After you have completed CD7,consider the following additional questions.
1.	Assume in situation 1, the unit selling pricechanged to $195, fixed overhead changed to $1,800 and
	the cost of modifications changed to $3,000. Showthe impact of these changes on decision to accept or
	reject the special order.
2.	Assume in situation 2, the purchase price of thenew oven changed to $100,000. Would this change
	the decision to retain or replace the oven?
3.	Assume in situation 3, that the estimated numberof seats to be produced changed to 3,500 and the cost topurchase
	one seat from an outside supplier changed to $55.Should Current Designs make or buy the seats?