Answer with solutions 12. Picnic Items, Inc. manufactures coolers of 10,000 units that contain a freezable ice bag. Foran annual volume of 10,000 units, fixed manufacturing costs of P500,000 are incurred. Variablecosts per unit amount are direct materials - P80; direct labor - P15, and variable factory overhead- P20Bags Corp. offered to supply the assembled ice bag for P40 with a minimum order of 5,000 units.If Picnic accepts the offer, it will be able to reduce variable labor and overhead by 5096. The directmaterials for the freezable bag will cost Picnic P20 if it will produce it. Considering Bags Corp.offer, Picnic shoulda. Buy the freezable ice bag due to P150,000 advantage.b. Produce the freezable ice bag due to P25,000 advantage.c. Produce the freezable ice bag due to P50,000 advantage.d. Buy the freezable bag due to P50,000 advantage.

Relevant cost is the cost which is relevant in decision making . Relevant cost is incurred for…

Answered: 12. Picnic Items, Inc. manufactures…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....

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Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Dixon Company manufactures part 347 for use in one of its main products. Normal annual production for part 347 is 100,000 units. The costs per 100 units is as follows Direct material. . $260 Direct labor. . Manufacturing overhead: Variable .. Fixed . Total costs per 100 units.. $640 . 100 120 160 Cext Company has offered to sell Dixon all 100,000 units it will need during the coming year for $600 per 100units. If Dixon accepts the often from Cext, the facilities used to manufacture part 347 could be used in the production of part 483. This change would save Dixon $90,000 in relevant costs. Also, a $100,000 cost item included in the fixed factory overhead that is specifically related to part 347 would be eliminated. Required: Should Dixon Company accept the offer from Cext Company? ww
Beta makes a component used in its engine. Monthly production costs for 1,000 component units are as follows: Direct materials $46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Total costs $115,000 It is estimated that 8% of the fixed overhead costs will no longer be incurred if the company purchases the component from an outside supplier. Beta has the option of purchasing the component from an outside supplier at $97.75 per unit. 22) If Beta accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total 23) If Beta purchases 1,000 units from the outside supplier per month, then what would be the change in operating income?
Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs Allocated facility-level costs $ 5,700 6,800 3,900 8,100 27,200 One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each. Required a. Calculate the total relevant cost. Should Jordan continue to make the containers? b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate the total avoidable costs. Should Jordan continue to make the containers? a. Total relevant cost Should Jordan continue to make the containers? b. Total avoidable cost Should Jordan continue to make the containers?
Mainstay Auto uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit. If Mainstay Auto makes the part, what will its operating income be? Select one: a. $150,000 greater than if the company bought the part b. $30,000 greater than if the company bought the part c. $30,000 less than if the company bought the part d. $54,000 greater than if the company bought the part e. $54,000 less than if the company bought the part
Finn Flying Company produces and sells kites for $51. The company has the capacity to produce 10,600 kites each period. At capacity, the costs assigned to each unit are as follows: Unit-level costs $31 Product-level costs $16 Facility-level costs $11 The company has received a special order for 230 kites. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? $70 $60 $31 $65
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…
The Mighty Music Company produces and sells a desktop speaker for $200. The company has the capacity to produce 60,000 speakers each period. At capacity, the costs assigned to each unit are as follows: Unit-level costs Product-level costs Facility-level costs The company has received a special order for 11,000 speakers. If this order is accepted, the company will have to spend $20,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? Multiple Choice O O $96.82 $146.82 $104.32 $95 $25 $15 $107.32
Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 5.00 Direct labor 11.00 Variable manufacturing overhead 6.00 Fixed manufacturing overhead 10.00 Total $32.00 Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231.(a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $enter a dollar amount Net relevant cost to buy $enter a dollar amount (b) Should Riverbed accept Ivanhoe’s offer?
Plainfield Company manufactures part G for use in its production cycle. The full cost per unit for each of 10,000 units of part G manufactured per year by Plainfield are as follows: Direct materials $ 2 Direct labor 15 Variable overhead 7 Fixed overhead 11 $ 35 Verona Company has offered to sell Plainfield 10,000 units of part G for $25 per unit. If Plainfield accepts Verona's offer, the released facilities could be used to save $42,000 in relevant costs in the manufacture of part H. In addition, $4 per unit of the fixed overhead applied to part G would be eliminated. Based solely on a short-term financial analysis, which alternative is more desirable and by what amount? Alternative Amount A) Manufacture $ 10,000 B) Manufacture $ 52,000 C) Buy $ 72,000 D) Buy $ 102,000 E) Buy $ 10,000
Your Company has the capacity to produce 80,000 units. It produces and sells 70,000 units of a product each year. At this level of activity, Clark Company incurs the following unit costs: Direct materials $18 Direct labor 25 Variable overhead 9 Fixed overhead 10 Variable S&A 7 Fixed S&A 12 A special order for 9,000 units under consideration would require the one-time rental of a special machine. The rental is for $36,000. If the order is accepted, $5 of the variable S&A can be avoided. What is the least amount the company can charge per unit in this special pricing decision? (Think breakeven.) O $61 O $56 O $58 O $59 O $57

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