14. Stewart Industries has been producing two bearings, components B12 and B18, for use in production. B12 B18 Machine hours required per unit Standard cost per unit 2.50 3.0 Direct materials P2.25 Р.75 Direct labor 4.00 4.50 Factory overhead Variable* 2.00 2.25 4.50 3.75 P12.00 Fixed** P15.00 *Variable manufacturing overhead is applied on the basis of direct labor hours. **Fixed manufacturing overhead is applied on the basis of machine hours. Stewart annual requirement for these components is 8,000 units of B12 and 11,000 units of B18. Recently, Stewart's management decided to devote additional machine time to other product lines resulting in only 41,000 machine hours per year that can be dedicated to the production of the bearings. An outside company has offered to sell Stewart the annual supply of the bearings at prices of P11.25 for B12 and P13.50 for B18. Stewart wants to schedule the otherwise idle 41,000 machine hours to produce bearings so that the company can minimize its costs (maximize its net benefits). The net benefit(loss) per machine hour that would result if Stewart accepts the supplier's offer of P13.50 per unit for component B18 is а. Р.50 b. Р(1.00) с. P1.50 d. (P(1.75) e. None of these; answer is 15. Refer to no. 14. Stewart will maximize its net benefits by a. Purchasing 4,800 units of B12 and manufacturing the remaining bearings. b. Purchasing 8,000 units of B12 and manufacturing 11,000 units of B18. c. Purchasing 11,000 units of B18 and manufacturing 8,000 units of B12. d. Purchasing 4,000 units of B18 and manufacturing the remaining bearings. e. None of the above; answer is
14. Stewart Industries has been producing two bearings, components B12 and B18, for use in production. B12 B18 Machine hours required per unit Standard cost per unit 2.50 3.0 Direct materials P2.25 Р.75 Direct labor 4.00 4.50 Factory overhead Variable* 2.00 2.25 4.50 3.75 P12.00 Fixed** P15.00 *Variable manufacturing overhead is applied on the basis of direct labor hours. **Fixed manufacturing overhead is applied on the basis of machine hours. Stewart annual requirement for these components is 8,000 units of B12 and 11,000 units of B18. Recently, Stewart's management decided to devote additional machine time to other product lines resulting in only 41,000 machine hours per year that can be dedicated to the production of the bearings. An outside company has offered to sell Stewart the annual supply of the bearings at prices of P11.25 for B12 and P13.50 for B18. Stewart wants to schedule the otherwise idle 41,000 machine hours to produce bearings so that the company can minimize its costs (maximize its net benefits). The net benefit(loss) per machine hour that would result if Stewart accepts the supplier's offer of P13.50 per unit for component B18 is а. Р.50 b. Р(1.00) с. P1.50 d. (P(1.75) e. None of these; answer is 15. Refer to no. 14. Stewart will maximize its net benefits by a. Purchasing 4,800 units of B12 and manufacturing the remaining bearings. b. Purchasing 8,000 units of B12 and manufacturing 11,000 units of B18. c. Purchasing 11,000 units of B18 and manufacturing 8,000 units of B12. d. Purchasing 4,000 units of B18 and manufacturing the remaining bearings. e. None of the above; answer is
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:14. Stewart Industries has been producing two bearings, components B12 and B18, for use in production.
B12
B18
Machine hours required per unit
Standard cost per unit
2.50
3.0
Р3.75
Direct materials
Direct labor
P2.25
4.00
4.50
Factory overhead
Variable*
2.00
2.25
3.75
P12.00
4.50
P15.00
Fixed**
*Variable manufacturing overhead is applied on the basis of direct labor hours.
**Fixed manufacturing overhead is applied on the basis of machine hours.
Stewart annual requirement for these components is 8,000 units of B12 and 11,000 units of B18.
Recently, Stewart's management decided to devote additional machine time to other product lines
resulting in only 41,000 machine hours per year that can be dedicated to the production of the bearings.
An outside company has offered to sell Stewart the annual supply of the bearings at prices of
P11.25 for B12 and P13.50 for B18. Stewart wants to schedule the otherwise idle 41,000 machine hours
to produce bearings so that the company can minimize its costs (maximize its net benefits).
The net benefit(loss) per machine hour that would result if Stewart accepts the supplier's offer of P13.50
per unit for component B18 is
а. РО.50
b. P(1.00)
c. P1.50
d. (P(1.75)
e. None of these; answer is
15. Refer to no. 14. Stewart will maximize its net benefits by
a. Purchasing 4,800 units of B12 and manufacturing the remaining bearings.
b. Purchasing 8,000 units of B12 and manufacturing 11,000 units of B18.
c. Purchasing 11,000 units of B18 and manufacturing 8,000 units of B12.
d. Purchasing 4,000 units of B18 and manufacturing the remaining bearings.
e. None of the above; answer is
6. The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing
cost of P20,000. If the lanterns are re-machined for P5,000, they could be sold for P9,000. If the lanterns
are scrapped, they could be sold for P1,000. What alternative is more desirable and what are the total
relevant costs for the alternative?
a. Re-machine and P5,000.
b. Re-machine and P25,000.
c. Scrap and P20,000.
d. Neither, as there is an overall loss under either alternatives.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education