4. Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Cost Driver Dollar Amount per Unit Direct materials $15 Direct labor 20 Factory overhead (25% of direct labor) Total cost per unit 40 If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 5% of the direct labor costs. a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. b. On the basis of the data presented, would it be advisable to make the carrying cases or to continue buying them? Explain.

4. Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Cost Driver Dollar Amount per Unit Direct materials $15 Direct labor 20 Factory overhead (25% of direct labor) Total cost per unit 40 If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 5% of the direct labor costs. a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. b. On the basis of the data presented, would it be advisable to make the carrying cases or to continue buying them? Explain.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 43% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 22 Factory overhead (43% of direct labor) 9.46 Total cost per unit $58.46 If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 16% of the direct labor costs. Question Content Area a. Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes…
HASF Glassworks makes glass flanges for scientific use Material cost $ 1 per flange and the glass blowers are paid a wage rate of 20 per hours a glass blower blows 10 flanges per hours. Fixed manufacturing costs for flanges are 20,000 per period. other nonmanufacturing cost associated with flanges are 10,000 per period and are fixed. 1-Find out total fixed cost2-Find out Variable cost per unit
1. Make-or-Buy Decision Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $61 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 39% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $29 Direct labor 20 Factory overhead (39% of direct labor) 7.8 Total cost per unit $56.8 If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs. 2. Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $599,500 and has $349,400 of accumulated depreciation to date, with a new machine that has a purchase price of $483,600. The old machine could be sold for $63,000.…
[The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $140 and $100, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 106,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Alpha Beta $ 32 $ 16 24 19 10 20 22 16 12 19 14 $ 121 $ 92 The company's traceable fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume Cane normally produces and sells 44,000 Betas per year. What is the financial dvantage (disadvantage) of discontinuing the Beta product line?
Could someone show all the steps and help me fill it in
Epsilon Company can produce a unit of product for the following costs: Direct material $ 8.10 Direct labor 24.10 Overhead 40.50 Total product costs per unit $ 72.70 An outside supplier offers to provide Epsilon with all the units it needs at $64.55 per unit. If Epsilon buys from the supplier, the company will still incur 30% of its overhead. Epsilon should choose to:
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
Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $84 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 50% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $56 Direct labor 20 Factory overhead (50% of direct labor) 10 Total cost per unit $86 If Diamond Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 10% of the direct labor costs. Required: A. Prepare a differential analysis, dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text…
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:Cost Driver Dollar Amount per UnitDirect materials $15Direct labor 20Factory overhead (25% of direct labor) 5Total cost per unit 40If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 5% of the direct labor costs. a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. b. Based on the data presented, would it be advisable to make the carrying cases or to continue buying them? Explain in your own words.
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 56,000 of these balls, with the following results: Sales (56,000 balls) Variable expenses Contribution margin Fixed expenses $ 1,400,000 840,000 560,000 373,000 Net operating income $ 187,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2) above. If the expected change in…
Gyro Company manufactures Products T and W and is operating at full capacity. Manufacturing Product W requires three times the number of machine hours required for Product T. Market research indicates that 1,000 additional units of Product W could be sold. The contribution margin by unit of product is as follows: Product T Product W Sales price $300 $325 Variable cost of goods sold (235) (250) Manufacturing margin $65 $75 Variable selling and administrative expenses (25) (10) Contribution margin $40 $65 Determine the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced and sold. $ Decrease or Increase
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 46% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 16 Factory overhead (46% of direct labor) 7.36 Total cost per unit $47.36 If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 13% of the direct labor costs. Question Content Area a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". Use a minus sign to indicate a…