Andretti Company has a single product called a Dak. The company normally produces and sells 89,000 Daks each year at a sellingprice of $60 per unit. The company's unit costs at this level of activity are given below:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadVariable selling expensesFixed selling expensesTotal cost per unit$ 8.509.002.309.00 ($801,000 total)3.702.50($222,500 total)$35.00A number of questions relating to the production and sale of Daks follow. Each question is independent. Req 1AReq 1BReq 2Req 3Forgone contribution marginTotal avoidable fixed costsFinancial advantage (disadvantage)Req 4A to 4C Req 4DReq 5Due to a strike in its supplier's plant, Andretti Company is unable to purchase more material for the production of Daks. Thestrike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levelsfor the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant wereclosed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and thefixed selling expenses would be reduced by 20% during the two-month period. (Round number of units produced to thenearest whole number. Round your intermediate calculations and final answers to 2 decimal places. Any losses/reductionsshould be indicated by a minus sign.)a. How much total contribution margin will Andretti forgo if it closes the plant for two months?b. How much total fixed cost will the company avoid if it closes the plant for two months?c. What is the financial advantage (disadvantage) of closing the plant for the two-month period?Show less

Contribution margin is the difference between the sales and variable expense. When fixed cost is…

Answered: Due to a strike in its supplier's…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Snipe Company has been purchasing a component, Part Q, for $19.20 per unit. Snipe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials $11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total $20.27 Prepare a differential analysis report dated March 12 of the current year. Round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make (Alternative 1) or Buy (Alternative 2) Part Q March 12 MakePart Q(Alternative 1) BuyPart Q(Alternative 2) DifferentialEffects(Alternative 2) Unit costs: $fill in the blank 35fe7afa507606f_2 $fill in the blank 35fe7afa507606f_3 $fill in the blank 35fe7afa507606f_4 fill in the blank 35fe7afa507606f_6 fill in the blank 35fe7afa507606f_7 fill in the blank 35fe7afa507606f_8…
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Sohar Manufacturing Company normally produces and sells 30,000 units ofproduct (X) each month. Product (X) is a small electrical relay used as acomponent part in the automotive industry. The selling price is $22 per unit,variable costs are $14 per unit, fixed manufacturing overhead costs total$150,000 per month, and fixed selling costs total $30,000 per month.Employment-contract strikes in the companies that purchase the bulk of theproduct (X) units have caused Sohar Company’s sales to temporarily drop toonly 8,000 units per month. Sohar Company estimates that the strikes will lastfor two months, after which time sales of product (X) should return to normal.Due to the current low level of sales, Sohar Company is thinking about closingdown its own plant during the strike, which would reduce its fixed manufacturingoverhead costs by $45,000 per month and its fixed selling costs by 10%. Startup costs at the end of the shutdown period would total $8,000.Required:As a Senior Manager at Sohar…
Corporate Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Corporate would pay a commission for its printing at a rate of $20 for every 500 pages printed. The company currently charges $0.20 per page to its customers. The paper used in printing costs the company $0.05 per page and other variable costs, including hourly labor, amount to $0.10 per page. Q. For what range of sales levels will Corporate prefer (a) the fixed lease agreement and (b) the commission agreement?
Birch Company normally produces and sells 49,000 units of RG-6 each month. The selling price is $30 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $170,000 per month, and fixed selling costs total $32,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company’s sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $41,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $15,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if…
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Company is capable of turning out fifteen completed units every 30 seconds. The plant normally operates five days a week on a two eight-hours shift. Each year, the factory is closed 12 working days for holidays. Machinery is idle 750 hours for cleaning, oiling and maintenance. Normal sales averages 110,000 units a year over five-year period. The expected sales volume for the year is 112,500 units. The fixed cost of operating the plant amounted to 385,000 per year. 1. compute the idle capacity cost under normal capacity if the plant operated at 3,400 hrs 2. Compute the fixed unit costs under practical capacity
Nakuru Manufacturing limited operates at normal capacity. It manufactures 800,000units of a product per year. The unit cost manufacturing at normal capacity is as follows:Kshs.Direct materials 20.00Direct labour 7.00Variable overheads 5.00Fixed overheads 10.00Selling price 50.00During the next three months. only 40,000 units can be produced and sold. Managementplans to shut down the factory, estimating that the manufacturing overhead can bereduced to Kshs.296,000 for the quarter when the factory is not operating; the fixedoverhead costs are incurred at uniform rate throughout the year. Additional costs offactory shutdown for 3 months are estimates at Kshs.56,OOO.Examine if the factory should shut down for 3 months with relevant calculations.
Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. (Round number of units produced to the nearest whole number. Round your intermediate calculations and final answers to 2 decimal places. Any losses or reductions should be indicated by a minus sign.)a. How much total contribution margin will Andretti forgo if it closes the plant for two months?b. How much total fixed cost will the company avoid if it closes the plant for two months?c. What is the financial advantage…
Birch Company normally produces and sells 49,000 units of RG-6 each month. The selling price is $20 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $155,000 per month, and fixed selling costs total $50,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company’s sales to temporarily drop to only 12,000 units per month. Birch Company estimates the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing its own plant during the strike, which would reduce fixed manufacturing overhead costs by $49,000 per month and fixed selling costs by 10%. Start-up costs at the end of the shutdown would total $12,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: What is the financial advantage (disadvantage) if Birch closes its own plant for two…
Snipe Company has been purchasing a component, Part Q, for $19.20 per unit. Snipe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials $11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total $20.27 Prepare a differential analysis report dated March 12 of the current year. Round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make (Alternative 1) or Buy (Alternative 2) Part Q March 12 Make Buy Differential Part Q Part Q Effects (Alternative 1) (Alternative 2) (Alternative 2) Unit costs: Purchase price v 19.20 X 19.20 Direct materials v 11.50 X Direct labor v Variable factory overhead v Fixed factory overhead y Total unit costs
Suppose plant capacity were only 13,000 pieces instead of 15,000 pieces each month. Thespecial order must either be taken in full or be rejected completely. Should Carilla accept thespecial order? Show your calculations

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