Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $30 each. The company is considering making theswitches internally at the following projected annual production costs:Unit-level material costUnit-level labor costUnit-level overheadBatch-level set-up cost (7,000 units per batch)Product-level supervisory salariesAllocated facility-level costsMultiple ChoiceThe company expects an annual need for 7,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to anothercompany for $2,800 a month. If the company decides to make the parts, total costs will be:$33,000 less than if the switches are purchased.$33,400 less than if the switches are purchased.$10,600 more than if the switches are purchased.$6$5$4$43,600 more than if the switches are purchased.$38,000$44,000$33,000

To calculate whether the cost of making the parts is higher than purchasing , relevant making cost…

Answered: Benitez Company currently outsources a…

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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A manufacturer is considering whether to make or buy a component used in its production. The annual cost of producing the 10,000 parts is as follows. Direct variable manufacturing costs $ 300,000Direct fixed manufacturing costs $ 100,000Allocated overhead $ 50,000 If the manufacture buys the component, the direct fixed manufacturing costs can be reduced by 73 per cent. What is the maximum unit purchasing price that makes purchasing a beneficial decision in comparison to making?
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 136 Variable costs per unit $ 118 Fixed costs per unit (based on capacity) $ 8 Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $133 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: Assume the Audio Division sells only 20,000 speakers per year to outside customers. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? What is the range of…
Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $40 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost $ 8 Unit-level labor cost $ 7 Unit-level overhead $ 6 Batch-level set-up cost (4,000 units per batch) $ 30,000 Product-level supervisory salaries $ 40,000 Allocated facility-level costs $ 25,000 The company expects an annual need for 4,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $2,000 a month. If the company decides to make the parts, total costs will be: Multiple Choice a.$18,000 more than if the switches are purchased. b.$43,000 more than if the switches are purchased. c.$22,000 less than if the switches are purchased. d.$25,000 less than if the switches are purchased.
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:Selling price per unit on the intermediate market $ 80Variable costs per unit $ 62Fixed costs per unit (based on capacity) $ 8Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $77 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.Required: 1. Assume the Audio Division is selling 22,500 speakers per year to outside customers. A. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? B. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? C. What is the…
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Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 200,000 200,000 200,000 Installing parts Direct labor hours 20,000 20,000 16,000 Purchasing parts Number of orders 7,600 6,498 3,990 Additionally, the following activity cost data are provided: Material usage: $11 per specialized part used; $27 per commodity part; no fixed activity cost. Installing parts: $21 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $47,000 annual salary; each clerk is capable of processing 1,900…
Blue Spruce Tech produces 60,000 iPhone adapters with the following costs:
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