6-33 Make or Buy at Nantucket Nectars Assume that Nantucket Nectars reports the following costs to make 17.5 oz. bottles for its juice cocktails: Nantucket Nectars Company Cost of Making 17.5-Ounce Bottles Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs Total Cost for 1,000,000 Bottles Cost per Bottle $ 80,000 $.080 30,000 .030 60,000 .060 85,000 .085 $255,000 $.255 Another manufacturer offers to sell Nantucket Nectars the bottles for $.25. The capacity now used to make bottles will become idle if the company purchases the bottles. Further, one supervisor with a salary of $60,000, a fixed cost, would be eliminated if the bottles were purchased. Prepare a schedule that compares the costs to make and buy the 17.5 oz. bottles. Should Nantucket Nectars make or buy the bottles?

6-33 Make or Buy at Nantucket Nectars Assume that Nantucket Nectars reports the following costs to make 17.5 oz. bottles for its juice cocktails: Nantucket Nectars Company Cost of Making 17.5-Ounce Bottles Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs Total Cost for 1,000,000 Bottles Cost per Bottle $ 80,000 $.080 30,000 .030 60,000 .060 85,000 .085 $255,000 $.255 Another manufacturer offers to sell Nantucket Nectars the bottles for $.25. The capacity now used to make bottles will become idle if the company purchases the bottles. Further, one supervisor with a salary of $60,000, a fixed cost, would be eliminated if the bottles were purchased. Prepare a schedule that compares the costs to make and buy the 17.5 oz. bottles. Should Nantucket Nectars make or buy the bottles?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $55 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 42% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 16 Factory overhead (42% of direct labor) 6.72 Total cost per unit $49.72 If Somerset 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 12% of the direct labor costs. a. Prepare a differential analysis dated April 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". Differential Analysis Make…
A5
6. Plumbing Company makes 4,000 units per year of a part called an axial tap for use in one of its products. Data concerning the unit production costs of the axial tap follow: Direct materials Direct labor £35 10 8 20 Variable manufacturing overhead ... Fixed manufacturing overhead Total manufacturing cost per unit... £73 An outside supplier has offered to sell Plumbing Company all of the axial taps it requires. If Plumbing Company decided to discontinue making the axial taps, 40% of the above fixed manufacturing overhead costs could be avoided. Assume that direct labor is a variable cost. Required: a. Assume Plumbing Company has no alternative use for the facilities presently devoted to production of the axial taps. If the outside supplier offers to sell the axial taps for £65 each, should Plumbing Company accept the offer? Fully support your answer with appropriate calculations. b. Assume that Plumbing Company could use the facilities presently devoted to production of the axial taps…
Item 3 Dawson Toys, Ltd., produces a toy called the Maze. The company has recently created a standard cost system to help control costs and has established the following standards for the Maze toy: Direct materials: 6 microns per toy at $0.32 per micron Direct labor: 1.3 hours per toy at $6.70 per hour During July, the company produced 5,400 Maze toys. The toy's production data for the month are as follows: Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 32,500 of these microns were still in inventory at the end of the month. Direct labor: 7,420 direct labor-hours were worked at a cost of $52,682. Required: 1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.) a. The materials price…
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Break-Even Units: Units for Target Profit Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 20,000 units at a price of $380 each. Product costs include: Direct materials $80.00 Direct labor $46.00 Variable overhead $11.00 Total fixed factory overhead $705,800 Variable selling expense is a commission of 6 percent of price; fixed selling and administrative expenses total $86,200. Required:
Complete A and B