Determine the maximum amount per unit Whalen Industries could pay an outside supplier?Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative? The management of Whalen Industries has been evaluating whether the company should continuemanufacturing a component or buy it from an outside supplier. A $100 cost per component wasdetermined as follows:Direct materialDirect labor| Variable manufacturing overheadFixed manufacturing overhead$ 15401035$100Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80per component, some members of management felt they could reduce costs by buying from outsideand discontinuing production of the component. If the component is obtained from Wilfert Corporation,Whalen Industries' unused production facilities could be leased to another company for $50,000 peryear.

solution : we have to decide between making or buying the component since fixed cost is unavoidable…

Determine the maximum amount per unit Whalen Industries could pay an outside supplier? Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

Determine the maximum amount per unit Whalen Industries could pay an outside supplier? Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The Sarasota Company manufactures 5,200 units of a part that could be purchased from an outside…

A: a. Relevant cost to make = Direct material + direct labor + variable manufacturing overhead = $3+2+5…

Q: Your company is considering two different methods of producing its product: purchase production…

A: Generally, maximizing firm value is a key objective for a company, as it reflects the overall wealth…

Q: Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports…

Q: Argus Company anticipates that other sales will be affected by the acceptance of a special order.…

A: Special order decisions are one of important type of decisions being made in business. Under this,…

Q: Why would a company want to know their operating leverage when they can already calculate the number…

A: Degree of operating leverage means the division of contribution with operating income. Number of…

Q: Suppose the government buys up all of the farmers' output at the floor price and then sells the…

A: A consumer is a person or group of people who purchases or we can says buys the product or service…

Q: Construct payoff and profit diagrams for the purchase of a 950-strike S&R call and sale of a…

A: A call option gives the holder the right to buy the underlying asset at a specified strike price.A…

Q: A growing firm is contemplating switching from a FIFO to a LIFO cost flow assumption forinventories…

A: In case of rising prices, when the LIFO is applied the cost of goods sold will increase (as the…

Q: How can the contribution margin be used to determine the profitability of Ford Motor Company's…

A: While determining the profitability of the organisation first to find out the total contribution…

Q: Is this statement true or false? please explain in detail The Discounted Cash Flow method is the…

A: The value of an investment is calculated using the discounted cash flow (DCF) approach based on the…

Q: Which of the following refers to the relative combination of products being sold by a firm? Group of…

A: Relative combination of products being sold by a firm is also known as Sales Mix As sales mix is a…

Q: Finance rocks had decided to reduce its fixed costs by seller some of its manufacturing facilities…

A: The cost structure refers to how expenses are organized within a business. It typically includes…

Q: By modifying the break-even equation, a company is able to determine the sales required to earn a…

A: · CVP analysis is used to identify the changes in costs and volume affect a company's…

Q: the best way to calculate the appropriate Discount Rate

A: In the valuation of the companies there is need of discount rate to calculate net present value of…

Q: You are considering a new project that will result in additional sales of an existing project…

A: When evaluating a capital project, expert should use incremental cash flows of the project to…

Q: n a makeorbuy decision, which of the following would not be relevant? Question content area bottom…

A: A make-or-buy decision is a strategic decision that organizations make to decide whether to produce…

Q: HEB grocery How can the contribution margin be used to determine the profitability of HEB grocery…

A: Contribution Margin is the difference between Sales Revenue and the Variable cost. In other words it…

Q: What is the interpretation of a price-to-book ratio = 1? Select one: a. The selling price of the…

A: PB ratio is a commonly used ratio in the industry to identify the stocks for investing. It comes…

Q: If, for competitive reasons, Washburn eventually has to move all its product ion back to Asia, (a)…

A: Production planning- Production planning is the process of conducting a systematic investigation and…

Q: What are the interest tax shields from the project? What is their present value? d. Show that the…

A: Working Note#1Calculation of value of debt:Enterprise value =$15 billionLess: Value of…

Q: Required information [The following information applies to the questions displayed below.] In each…

A: The acceptable transfer price between the transferor and transferee division is the one where the…

Q: Determine the cost of equity to finance the plant modernization.?

A: The cost of equity is the revenue a firm needs to determine if a venture satisfies the conditions of…

Question

Determine the maximum amount per unit Whalen Industries could pay an outside supplier?

Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

The management of Whalen Industries has been evaluating whether the company should continue
manufacturing a component or buy it from an outside supplier. A $100 cost per component was
determined as follows:
Direct material
Direct labor
| Variable manufacturing overhead
Fixed manufacturing overhead
$ 15
40
10
35
$100
Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80
per component, some members of management felt they could reduce costs by buying from outside
and discontinuing production of the component. If the component is obtained from Wilfert Corporation,
Whalen Industries' unused production facilities could be leased to another company for $50,000 per
year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1$65

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which of the following is an economic motivation for an acquisition? Using a cash surplus. b. Diversification. c. Economies of scale. d. All of these choices.
Volumetric Production Payments (VPP) and Forward Sales which one do you think presents more favourable terms and why? Which will you recommend for Ghana under given circumstances?
The difference between the average customer’s willingness to pay and the total costs of a product is known as ______. When a company makes a profit, the difference between the price of the product and the cost of production is known as what? Value creation and value capture are key concepts for which parts of business? If a company innovates in a way that reduces its production costs without affecting any features of the product, would that create value? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value created by airlines? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value captured by airlines? Please solve all part and do not give solution in image format thanku
In order to determine the optimal sales mix for a company, one should evaluate the contribution margin per unit of whatever the scarce resource is True or Faise
When evaluating if a company should accept a new contract to produce more product it should: Evaluate all possible fixed cost of accepting the contract. Evaluate the propose contract using a contribution margin approach. Accept the new contract if the sales price for the product is equal to or higher than the current sale price. Accept the new contract if fixed costs will remain the same.
2.Which of the following are sunk costs for deciding whether to accept or reject a project? i.Payments for maintenance of a factory that would need to be made if the project is accepted.ii.The salaries of employees that would need to be hired to execute the new project.iii.Payments that were made to an economist to generate economic forecasts that were used when deciding whether to accept or reject the project.iv.The additional tax expenses that are expected to result from the profits of the new project. a.iii and iv, but not i or iib.ii and iii, but not i or ivc.iii onlyd.iv only
When negotlating a transfer price, whlch prlce Is most acceptable to the selling divislon if they are operating with Idle capacity? Multiple Choicel the price must cover at least the variable manufacturing costs of the selling division the price must be less than the variable manufacturing costs of the selling division the price must cover at least the variable manufacturing costs of the buying division the price must cover at least the selling price to outside customers
When the selling division in an Internal transfer can sell every product at Its market price, then the lowest acceptable transter price as far as the seling diion is concened is Multiple Cholce The amount that the purchasing division would have to pay an outslde seller to acquire a similar product for Its use. The fixed cost of producing a unit of product. The market price charged to outside customers. The variable cost of producing a unit of product. Total cost of producing a unit of product.
Which of the following items will not cause the company's ROA to increase? Multiple Choice O O Reducing costs. Reducing company assets without impacting sales. Increasing company assets. Increasing the selling price per unit. $