Brian Industries has been producing two ingredients, components G1 and G2, for use in manufacturing its main products. G1 7.5 G2 9.0 Machine hours required per unit Standard cost per unit: Direct material 4.50 7.50 Direct labor 8.00 9.00 Manufacturing overhead: Variable (See Ref. 1) Fixed (See Ref. 2) 4.00 7.50 P 24.00 4.50 9.00 P 30.00 Brian's annual need for these ingredients is 8,000 units of G1 and 11,000 units of G2. Recently, Brian's management decided to devote additional machine time to othe product lines resulting in only 123,000 machine hours per year that can be dedicated to the production of the ingredients. An outside company has offered to sell Brian the annual supply of the ingredients at prices of P22.50 for G1 and P27.00 for G2. Brian wants to schedule the otherwise idle 123,000 machine hours to produce ingredients so that the company can maximize its net benefits (or minimize its costs). Ref. 1: Variable manufacturing overhead is applied on the basis of direct labor hours. Ref. 2: Fixed manufacturing overhead is applied on the basis of machine hours. Assume that Brian's idle capacity of 123,000 machine hours has a traceable avoidable annual fixed cost of P44,000 that will continue if the capacity is not used. The maximum price Brian would be willing to pay a supplier for component G2 is: (nearest two decimal places)
Brian Industries has been producing two ingredients, components G1 and G2, for use in manufacturing its main products. G1 7.5 G2 9.0 Machine hours required per unit Standard cost per unit: Direct material 4.50 7.50 Direct labor 8.00 9.00 Manufacturing overhead: Variable (See Ref. 1) Fixed (See Ref. 2) 4.00 7.50 P 24.00 4.50 9.00 P 30.00 Brian's annual need for these ingredients is 8,000 units of G1 and 11,000 units of G2. Recently, Brian's management decided to devote additional machine time to othe product lines resulting in only 123,000 machine hours per year that can be dedicated to the production of the ingredients. An outside company has offered to sell Brian the annual supply of the ingredients at prices of P22.50 for G1 and P27.00 for G2. Brian wants to schedule the otherwise idle 123,000 machine hours to produce ingredients so that the company can maximize its net benefits (or minimize its costs). Ref. 1: Variable manufacturing overhead is applied on the basis of direct labor hours. Ref. 2: Fixed manufacturing overhead is applied on the basis of machine hours. Assume that Brian's idle capacity of 123,000 machine hours has a traceable avoidable annual fixed cost of P44,000 that will continue if the capacity is not used. The maximum price Brian would be willing to pay a supplier for component G2 is: (nearest two decimal places)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Brian Industries has been producing two ingredients, components G1 and G2, for use in manufacturing its main products.
G1
7.5
G2
Machine hours required per unit
Standard cost per unit:
9.0
Direct material
P
4.50
P 7.50
Direct labor
8.00
9.00
Manufacturing overhead:
Variable (See Ref. 1)
Fixed (See Ref. 2)
4.00
4.50
9.00
P 30.00
7.50
P 24.00
Brian's annual need for these ingredients is 8,000 units of G1 and 11,000 units of G2. Recently, Brian's management decided to devote additional machine time to other
product lines resulting in only 123,000 machine hours per year that can be dedicated to the production of the ingredients. An outside company has offered to sell Brian
the annual supply of the ingredients at prices of P22.50 for G1 and P27.00 for G2. Brian wants to schedule the otherwise idle 123,000 machine hours to produce
ingredients so that the company can maximize its net benefits (or minimize its costs).
Ref. 1: Variable manufacturing overhead is applied on the basis of direct labor hours.
Ref. 2: Fixed manufacturing overhead is applied on the basis of machine hours.
Assume that Brian's idle capacity of 123,000 machine hours has a traceable avoidable annual fixed cost of P44,000 that will continue if the capacity is not used. The
maximum price Brian would be willing to pay a supplier for component G2 is: (nearest two decimal places)
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