Determine the target cost per unit of the toy. Calculate the cost gap per unit of the toy.
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Avenger Toy Shop produces and sells children’s toys such as puzzles and tents which help the development of young minds. The shop plan to produce and sell a new toy, Knitted Baby Rattle for their new target customers. The estimated production costs are as follows:
- Two types of materials are required to produce a new toy, Direct and Indirect Materials. Costs of Direct Materials is RM3 per meter while Indirect Materials cost RM4 per meter. Each unit toy uses two (2) meters of Direct Materials and four (4) meters of Indirect Materials.
- The Labour cost per unit is RM12.
- Overhead costs are RM10 per unit.
Based on a market survey, competitors sell this product at a selling price of RM50. The new toy’s target return on sales is 20%.
- Determine the target cost per unit of the toy.
- Calculate the cost gap per unit of the toy.
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- Wing Sporting Goods (WSG) is a small company that makes two models of a metal baseball bat—Sport and Collegiate. Both models are produced on a single machine. The price and costs of the two models are Sport Collegiate Price per unit $ 285 $ 470 Variable cost per unit $ 108 $ 188 Machine minutes per unit 6 15 The one machine that is used to produce both models has a capacity of 35,100 machine-minutes per quarter. Fixed manufacturing costs per quarter are $445,000. Required: a. Suppose that the maximum unit sales in a quarter that WSG can achieve is 6,000 units of each product. How many units of each model should WSG produce in a quarter? b. Suppose that the maximum unit sales in a quarter that WSG can achieve is 4,200 units of each product. How many units of each model should WSG produce in a quarter?Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* $ 5,200 6,500 3,600 9,300 26,600 Allocated facility-level costs *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?Each year, Giada Company produces 20,000 units of a component part used in tablet computers. An outside supplier has offered to supply the part for $1.39. The unit cost is: Direct materials $0.83 Direct labor 0.34 Variable overhead 0.13 Fixed overhead 2.55 Total unit cost $3.85 1. What are the alternatives for Giada Company? a. Make the part in house b.Buy the part externally c.Make the part in house or buy the part externally d.None 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. a.Direct materials, direct labor and variable and fixed overhead b.Direct materials, direct labor and variable overhead c.Direct materials, direct labor and fixed overhead d.None List the relevant cost(s) of external purchase. a.Purchase price b.Sales price c.Material price d.None 3. Which alternative is more cost effective and by how much? a. Making the part in house b. Buying the part from the external supplier by $___________ 4. What if…
- Rough Stuff makes 2 products: khaki shorts and khaki pants for men. Each product passes through the cutting machine area, which is the chief constraint during production. Khaki shorts take 15 minutes on the cutting machine and have a contribution margin per pair of shorts of $16. Khaki pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $32. Based on the contribution margin per the constrained resource, which product should Rough Stuff produce? a. khaki short b. khaki pantsMo Furniture manufactures a frame for use in its production of sofas. When 10,000 frames are produced, the costs per unit are: Direct materials $ 12 Direct manufacturing labor 60 Variable manufacturing overhead 24 Fixed manufacturing overhead 32 Total $128 A company has offered to sell Mo Furniture 10,000 sofa frames for $120 per unit. Fixed manufacturing overhead of $20 per unit used to make the frame could be eliminated if the frames were purchased instead of made. What is the relevant cost per unit to make the frame in this make or buy decision?Thornton Electronics currently produces the shipping containers It uses to deliver the electronics products It sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,400 3,300 9,900 28,000 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Thornton for $2.60 each. Required a. Calculate the total relevant cost. Should Thornton continue to make the containers? b. Thornton could lease the space it currently uses in the manufacturing process. If leasing would produce $12,100 per month, calculate the total avoidable costs. Should Thornton continue to make the containers? a. Total relevant cost a. Should Thornton continue to make the containers? b. Total avoidable cost b. Should Thornton continue to make the containers?
