Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material P1,000 Material handling (20% of DMC) Direct labor 200 8,000 мон 12,000 P21,200 TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?
Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material P1,000 Material handling (20% of DMC) Direct labor 200 8,000 мон 12,000 P21,200 TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I need an answer for number 1, please, thank you!
Transcribed Image Text:Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of
manufacturing one unit of A23 is the following:
Direct material
Material handling (20% of DMC)
P1,000
200
Direct labor
8,000
12,000
P21,200
МОН
TMC
Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct
materials and purchased component on the basis of their cost. This is a separate charge in addition to
manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third
fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of
P15,000.
1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would
be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by
what amount?|
2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase
the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount?
3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture
another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to
maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part
A23?
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