Cullumber, Inc. uses 840 units of the component NJF1 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows: Direct materials Direct labor Overhead Total $69 52 The unit 100 $221 Overhead costs include variable material handling costs of $14 that are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 50% variable costs and 50% fixed costs. A vendor has offered to supply the NJF1 component at a price of $191 per unit. (a) Should Cullumber purchase the component from the outside vendor if its capacity remains idle? be purchased from the outside vendor.

Cullumber, Inc. uses 840 units of the component NJF1 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows: Direct materials Direct labor Overhead Total $69 52 The unit 100 $221 Overhead costs include variable material handling costs of $14 that are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 50% variable costs and 50% fixed costs. A vendor has offered to supply the NJF1 component at a price of $191 per unit. (a) Should Cullumber purchase the component from the outside vendor if its capacity remains idle? be purchased from the outside vendor.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

pt in Progress
Cullumber, Inc. uses 840 units of the component NJF1 every month to manufacture one of its products. The unit costs incurred to
manufacture the component are as follows:
Direct materials
Direct labor
Overhead
Total
(a)
$69
52
Overhead costs include variable material handling costs of $14 that are applied to products on the basis of direct material costs. The
remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 50% variable costs and 50% fixed costs.
A vendor has offered to supply the NJF1 component at a price of $191 per unit.
100
$221
The unit
Should Cullumber purchase the component from the outside vendor if its capacity remains idle?
be purchased from the outside vendor.

Current Attempt in Progress
Sunland Corporation currently manufactures a subassembly for its main product. The costs per unit are as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
$4
Sunland should
13
8
11
$36
Funkhouser Company has contacted Sunland with an offer to sell it 5,000 of the subassemblies for $29 each. If Sunland buys the
subassemblies, $5 of the fixed overhead per unit will be allocated to other products.
Should Sunland make or buy the subassemblies?
to save $
per unit.

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