Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor Variable overhead Fixed overhead $150. An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be $7,350. 11,250 $(150). O $ (3,600). 12,600 16,200 A W &

Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor Variable overhead Fixed overhead $150. An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be $7,350. 11,250 $(150). O $ (3,600). 12,600 16,200 A W &

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

Southfield Division offers its product to outside markets for $134. It incurs variable costs of $59 per unit and fixed costs of $148,500 per month based on monthly production of 23,900 units. Northfield Division can acquire the product from an alternate supplier for $139 per unit or from Southwest Division for a transfer price of $134 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit
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.)…
Bramble Corp. incurs the following costs to produce 12000 units of a subcomponent: Direct materials $8400 Direct labor 12000 Variable overhead 12000 Fixed overhead 19000 An outside supplier has offered to sell Bramble the subcomponent for $2.15 a unit. No fixed costs are avoidable. If Bramble accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3600. The increase (decrease) in net income from accepting the offer would be O $(3600). $10200. O $(3000). O $3000.
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
Vaughn Manufacturing has the following costs when producing 100000 units: Variable costs $600000 Fixed costs 900000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $167000. The net increase (decrease) in the net income of accepting the supplier's offer is O $317000. O $(17000). O $832000. O $283000.
Liguanea Pharmaceuticals Limited (LPL) currently sells a product the “sovereign” for $2200. This price is based on annual demand. Analysis indicates that if the company increase the price by $100 annual demand will fall by 400 units. At the current price 4,000 units are demanded. The product has the following cost structure per unit: Direct material $225 Direct labour $75 Direct expenses $150 Variable overheads $90 Fixed overheads $300 Variable selling expense $60 Fixed selling expenses $450 Management wants to know the optimal production quantity and its maximum profits. Determine the price equation Determine the optimal price and quantity Determine the optimal profits.
Tamarisk Manufacturing incurs unit costs of $7.20 ($5.20 variable and $2.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 17,200 of the parts for $5.70 per unit. If it accepts the offer, Tamarisk will save all variable costs and $1.00 of fixed costs. Prepare an analysis showing the total cost savings, if any, that Tamarisk will realize by buying the part. (Round per unit answers to 2 decimal places, eg. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, e.g. (15,000).)
Need Answer of this Question
San Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell San Clemente the subcomponent for $2.85 a unit. If San Clemente accepts the offer, by how much will net income increase (decrease)? ($8,850) decrease ($2,850) decrease O $19,950 increase $3,750 increase
Sheffield Corp. incurs the following costs to produce 9000 units of a subcomponent: Direct materials Direct labor Variable overhead Fixed overhead $9000 O $28950 O $(3500) $8950 O $(3250) 12500 12200 20000 An outside supplier has offered to sell Sheffield the subcomponent for $2.75 a unit. No fixed overhead costs are avoidable. If Sheffield accepts the offer, by how much will net income increase (decrease)?
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
Melbourne Corporation has traditionally made a subcomponent of its major product. Annual production of 30,000 subcomponents results in the following costs: Direct materials $ 250,000 Direct labor $ 200,000 Variable manufacturing overhead $ 190,000 Fixed manufacturing overhead $ 120,000 Melbourne has received an offer from an outside supplier who is willing to provide the 30,000 units of the subcomponent each year at a price of $28 per unit. There would be no effect of this decision on the total fixed manufacturing overhead of the company. Melbourne knows that the facilities now being used to manufacture the subcomponent could be rented to another company for revenue of $80,000 per year if the subcomponent were purchased from the outside supplier. The financial advantage (disadvantage) of making the subcomponent would be: Multiple Choice $0 $280,000 $120,000 $200,000