Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 gear housings for a new off-roadvehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges hasdeveloped costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturingsystem (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow:Annual contracted unitsAnnual fixed costPer unit variable costGeneral-PurposeEquipment (GPE)250,000$100,000$18.00Flexible ManufacturingSystem (FMS)250,000$225,000$14.00DedicatedMachine (DM)250,000$525,000$13.00The option GPE is best when the contracted volume is below units (enter your response as a whole number). The option GPE is best when the contracted volume is below 75,000 units (enter your response as a whole number).The option FMS is best when the contracted volume is between 75001 and 325,000 units (enter your responses aswhole numbers).The option DM is best when the contracted volume is over 325,000 units (enter your response as a whole number).

Decision-making in costing refers to the process of using cost information to make informed…

Answered: Borges Machine Shop, Inc., has a 1-year…

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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Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $35 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Per Unit 15,000 Units Per Year Direct materials $ 14 $ 210,000 Direct labor 10 150,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead, traceable 6* 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $ 42 $ 630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?…
Lakeside Inc. produces a product that currently sells for $60 per unit. Current production costs per unit include direct materials, $16; direct labor, $18; variable overhead, $11; and fixed overhead, $11. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 9,200 units at $46 per unit. Lakeside currently has unused production capacity. Required: a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization. Increase in operating income
Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 5.00 Direct labor 11.00 Variable manufacturing overhead 6.00 Fixed manufacturing overhead 10.00 Total $32.00 Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231.(a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $enter a dollar amount Net relevant cost to buy $enter a dollar amount (b) Should Riverbed accept Ivanhoe’s offer?
Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow. Model number 6754: Variable costs, $16.00 per unit Annual fixed costs, $986,300 Model number 4399: Variable costs, $11.80 per unit Annual fixed costs, $1,114,300 Corrigan's selling price is $66 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.) 2-a. Calculate the net income of the two systems if sales and production are expected to average 63,400 units per year. Model Number 6754 Model Number 4399 Net Income
Every year Marigold Industries manufactures 6,100 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total (a) Total relevant cost to make $ $4.00 Net relevant cost to buy 10.00 Carla Vista, Inc., has offered to sell 6,100 units of part 231 to Marigold for $34 per unit. If Marigold accepts Carla Vista's offer, its freed-up facilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Marigold would eliminate 40% of the fixed overhead applied to part 231. $ 6.00 10.00 Calculate total relevant cost to make and net cost to buy. $30.00
A machine part is manufactured at a unit cost of 40¢ for material and 15¢ for direct labor. An investment of $500,000 in tooling is required. The order calls for 3 million pieces. Halfway through the order, managers learn that a new method of manufacture can be put into effect that will reduce the unit costs to 34¢ for material and 10¢ for direct labor—but it will require $100,000 for additional tooling. This tooling will not be useful for future orders. Other costs are allocated at 2.5 times the direct labor cost. What, if anything, should be done?
Gadubhai
In its production process, Purple Tree Inc uses a specialized part in the manufacturing of their fancy widget. The costs to make a part are: direct material, $15; direct labor, $27; variable overhead, $15; and applied fixed overhead, $32. Purple Tree has received a quote of $60 from a potential supplier for this part. If Purple Tree buys the part, 75 percent of the applied fixed overhead would continue. They need 12,000 units of the specialized part. Purple Tree Company would be better off by Group of answer choices $60,000 to buy the part. $348,000 to buy the part. $30,000 to manufacture the part. $216,000 to manufacture the part.
Mohave Corp. is considering outsourcing production of ht eumbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 9600 units per year for 7.00 each. Mohave has the following information about the cost of producing tote bags:Directs materials 3.00Direct Labor 2.00Variable manufacturing overhead 1.00Fixed manufacturing overhead 2.50Total cost per unit 8.50Mohave has deteremined that all variable costs could be eliminated by outsourcing the tote bads, while 75 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specifif use in mind for the space currently dedicated to producing the tote bags.1.) Compute the difference in cost between making and buying the umbrella tote bag. 2.) Based strictly on the incremental analysis should mohave buy the tote bags or contiunue to make them? 3-a.) Suppose that the space mohave currently uses to make the bags could be utilized by a new product line that would…
Old Camp Company manufactures awnings for its own line of tents. The company is currently operating at capacity and has received an offer from one of its suppliers to make the 10,000 awnings it needs for $18 each. Old Camp’s costs to make the awning are $7 in direct materials and $5 in direct labor. Variable manufacturing overhead is 80 percent of direct labor. If Old Camp accepts the offer, $32,000 of fixed manufacturing overhead currently being charged to the awnings will have to be absorbed by other product lines.Required:1. Complete the incremental analysis for the decision to make or buy the awnings in the table provided below. Make Buy Net Income Increase (Decrease) Direct Materials Direct Labor Variable OH Fixed OH Purchase Price Total 2. Should Old Camp continue to manufacture the awnings or should they purchase the awnings from the supplier?3. Assuming that the capacity released by purchasing the awnings…
Mostera manufactures two components A & B. There are to be 5000 of each component manufactured next year. The following information is available for each unit of A&B. Machine Hrs Variable CostUnit of A 4 25Unit of B 6 34 A total of 30,000 machine hours are available.A sub-contractor is willing to supply Monstera with units of A & B for P27 and P38 respectively. Advise Monstera whether to make or buy.
Leach Finishing makes various metal fittings for the construction industry. Three of the fittings, models X-12, X-24, and X-30, require grinding on a patented machine of which Leach has only one. The cost of production information for the three products follow: X-12 Price per fitting Variable cost per fitting Units per hour of grinding The testing machine used for both models has a capacity of 2,870 hours annually. Fixed manufacturing costs are $484,000 annually. Required A Required B X-24 $29 $ 14 18.0 X-12 X-24 X-30 units units units $ 45 X-30 $21 12.5 Required: a. Suppose that Leach Finishing can sell at most 55,600 units of any one fitting. How many units of each fitting model should Leach Finishing produce annually? b. Suppose that Leach Finishing can sell at most 15,300 units of any one fitting. How many units of each fitting should Leach Finishing produce annually? 15 Complete this question by entering your answers in the tabs below. $ 64 $38 10.0 Suppose that Leach Finishing…

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