Beto Company pays $3.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $2.70 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Make Buy Direct labor Overhead Cost to buy Cost per unit Cost difference |(b) Company should:

Beto Company pays $3.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $2.70 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Make Buy Direct labor Overhead Cost to buy Cost per unit Cost difference |(b) Company should:

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

Zesta Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows: Direct materials $ 8 Direct labor 4 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 1 $ 18 An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each. The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Based on these data, whether the company accept or reject the supplier offer? And Why?
Beto Company pays $7.30 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $8.40 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should: Make Buy
Ahrends Corporation makes 44,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials $ 23.80 Direct labor 27.70 Variable manufacturing overhead 8.70 Fixed manufacturing overhead 39.70 Unit product cost $ 99.90 An outside supplier has offered to sell the company all of these parts it needs for $86.20 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $286,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $34.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's…
Ahrends Corporation makes 46,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 14.30 23.90 3.00 28.30 $69.50 An outside supplier has offered to sell the company all of these parts it needs for $55.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $368,000 per year If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $24.90 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products What…
Scott Corporation produces a part for use in the production of one of its products. The per-unit costs associated with the annual production of 1,000 units of this part are as follows: Direct Materials $10.50 $24.00 Direct labor Variable factory overhead $5.50 Fixed factory overhead $12.00 Total Costs $52.00 $5,000 of the fixed factory overhead costs associated with the production of this product are common fixed costs. Larson Company has offered to sell 1,000 units of the same part to Scott Corporation for $42 per unit. Scott should: Select one: a. buy the part, because this would save $10.00 per unit. X b. buy the part, because this would save the company $5,000 annually. c. make the part, because this would save the company $5,000 annually. d. make the part, because this would save $2.00 per unit.
Rooney 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* $ 5,200 6,500 3,600 9,300 26,600 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 Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?
Lakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include direct materials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $5.20 per unit? Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit? a. b. Should Lakeside outsource conversion process at this cost?
Ahrends Corporation makes 43,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 12.80 23.30 2.10 26.50 $ 64.70 An outside supplier has offered to sell the company all of these parts it needs for $51.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $301,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $23.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…
Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $21, computed as follows: Direct materials $ 8 Direct labor 7 Variable manufacturing overhead 1 Fixed manufacturing overhead 5 Unit product cost $ 21 An outside supplier has offered to provide the annual requirement of 5,500 of the parts for only $13 each. The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the costs saved by purchasing the units of purchasing the parts from the outside supplier would be: Multiple Choice $1 per unit on average ($8) per unit on average $6 per unit on average ($1) per unit on average
Haver Company currently pays an outside supplier $33 per unit for a part for one of its products. Haver is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $14 per unit, direct labor of $17 per unit, and incremental overhead of $3 per unit. Method 2 for making the part would require direct materials of $14 per unit, direct labor of $11 per unit, and incremental overhead of $7 per unit. Required: 1. Compute the cost per unit for each alternative method of making the part. 2. Should Haver make or buy the part? If Haver makes the part, which production method should it use? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the cost per unit for each alternative method of making the part. Cost per unit Make with Method 1 Make with Method 2 Cost per unit $ 0 Required 1 $ 0 $ Buy Required 2 >
Thornton 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 $ 5,100 6,400 3,300 9,900 28,000 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Thornton for $2.60 each. Required a. Calculate the total relevant cost. Should Thornton continue to make the containers? b. Thornton could lease the space it currently uses in the manufacturing process. If leasing would produce $12,100 per month, calculate the total avoidable costs. Should Thornton continue to make the containers? a. Total relevant cost a. Should Thornton continue to make the containers? b. Total avoidable cost b. Should Thornton continue to make the containers?
Mighty Safe Fire Alarm is currently buying 58,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $31 per unit; direct labor, $10 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $89,000. Which option should be selected and why? Oa. make, $464,000 increase in profits Ob. buy, $89,000 increase in profits Oc. make, $375,260 increase in profits Od. buy, $375,260 increase in profits