Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is265,000 units. The facility has a practical capacity of 280,000 units annually. The company leased the current facility because facilitiescapable of manufacturing the unit require machines that can produce 70,000 units each. The annual cost of the facility is $1,120,000.The variable cost of a part is $4.Required:a. What cost per unit should the cost system report to facilitate management decision making?Note: Round your answer to 2 decimal places.b. What is the cost of excess capacity?a. Cost per unitb. Cost of excess capacity

a. To determine the cost per unit that the cost system should report, we need to consider both fixed…

Answered: Cairney, Incorporated manufactures 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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Rubber and Steel Company is planning to manufacture a new product. The variable manufacturing costs will be $66 per unit and the fixed costs are estimated to be $6490. The selling price of the product is to be $137 per unit. Variable selling expense is expected to be $16 per unit. (a) Calculate the contribution margin per unit. (b) Determine the contribution rate. (c) Calculate the break-even point in units. (d) Determine the break-even point in sales dollars. (a) The contribution margin per unit is S. (Type a whole number.) (b) The contribution rate is %. (Round to two decimal places as needed.) (c) The break-even point is units. (Round up to the nearest unit.) (d) The break-even point in sales dollars is $. (Type a whole number.)
Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit $3,200,000 Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: $2,028,500 Capital-Intensive Labor-Intensive
Cox Electric makes electronic components and has estimated the following for a new design of one of its products: Fixed cost = $10,000 Material cost per unit = $ 0.15 Labor cost per unit = $ 0.10 Revenue per unit = $ 0.65 These data are given in the file CoxElectric. Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost rom total revenue. Create a spreadsheet model and construct a 1-way table and determine the breakeven point (use intervals of 10,000 units). Group of answer choices 20,000 - 30,000 10,000 - 20,000 30,000 - 40,000 25,000 30,000 20,000
Wings Incorporated manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor that would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Wings does not purchase these parts from the subcontractor it must produce them in-house with the following unit costs: Direct materials Direct labor Variable overhead Cost per Unit $31 19 8 In addition to the above costs, if Wings produces part PQ107, it would have a retooling and design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 internally are:
Finch Modems has excess production capacity and is considering the possibility of making and selling paging equipment. The following estimates are based on a production and sales volume of 1,600 pagers. Unit-level manufacturing costs are expected to be $26. Sales commissions will be established at $1.60 per unit. The current facility- level costs, including depreciation on manufacturing equipment ($66,000), rent on the manufacturing facility ($56,000), depreciation on the administrative equipment ($13,800), and other fixed administrative expenses ($74,950), will not be affected by the production of the pagers. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (pagers) on the basis of the number of units of product made (i.e., 5,600 modems and 1,600 pagers). Required a. Determine the per-unit cost of making and selling 1,600 pagers. (Do not round intermediate calculations. Round your answer to 3 decimal places.)…
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
Day Star collected the following information: Cost to buy one unit Production costs per unit: Direct materials Direct labour Variable overhead Total fixed overhead Day Star can sell 25,000 units per year, at $80 each. The company also has an offer from a subsidiary to rent its plant facilities for $2,000,000. The fixed overhead will be incurred in each alternative, but there will be a savings of $150,000 in the fixed costs under the renting alternative. A) buy Based on the above information only, should Day Star make or buy the product or rent its facilities out? B) make $22 $16 $2 $360,000 C) either make or buy - indifferent $48 D) rent the facilities to the subsidiary E) either make or rent - indifferent
Make or Buy Desert Industries manufactures 5,000 units of Part X300 each month for use in production. The facilities now being used to produce Part X300 have fixed monthly overhead costs of $75,000, and a theoretical capacity to produce 7,000 units per month. If Desert were to buy Part X300 from an outside supplier, the facilities would be idle and 80% of the fixed costs would continue to be incurred. There are no alternative uses for the production facilities. The variable production costs of Part X300 are $34 per unit. Fixed overhead is allocated based on planned production levels. If Desert Industries continues to use 5,000 units of Part X300 each month, it would realize a net benefit by purchasing Part X300 from an outside supplier only if the supplier's unit price is less than what amount? $0 Check
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A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: Location A Location B Monthly Fixed Cost ( $ ) $16000 $34000 Unit variable cost ( $ /unit) (including labor, material and transportation cost) $20 $5 Which one of the the following monthly production volume is closest to the volume where the company would be indifferent between the two locations ? Select one: a. 1320 b. 1200 c. 780 d. 1440
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $ 100,000, which includes fixed costs of $ 40,000 and variable costs of $ 60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $ 15,000. If Voltaic outsources, what will be the effect on operating income?A. decrease of $11,000B. increase of $ 11,000C. increase of $ 15,000D . decrease of $ 8,000
Magnificent Modems has excess production capacity and is considering the possibility of making and selling security tokens. The following estimates are based on a production and sales volume of 1,000 security tokens. Unit-level manufacturing costs are expected to be $20. Sales commissions will be established at $1 per unit. The current facility-level costs, including depreciation on manufacturing equipment ($60,000), rent on the manufacturing facility ($50,000), depreciation on the administrative equipment ($12,000), and other fixed administrative expenses ($71,950), will not be affected by the production of the security tokens. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (security tokens) on the basis of the number of units of product made (i.e., 5,000 modems and 1,000 security tokens). Required a. Determine the per-unit cost of making and selling 1,000 security tokens. Note: Do not round intermediate…

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