Every year Kansas Company manufactures 7,900 units of part 231 foruse in its production cycle. The per unit costs of part 231 are asfollows:Direct materialsDirect labor$3$11Variable manufacturing overhead $6Fixed manufacturing overhead $10Total$30Verona Company has offered to sell 7,900 units of part 231 to Kansasfor $33 per unit. If Kansas accepts Verona's offer, its freed-upfacilities could be used to earn $11,000 in contribution margin bymanufacturing part 240. In addition, Kansas would eliminate 40% ofthe fixed overhead applied to part 231.Calculate total relevant cost to make and net cost to buy.

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Answered: Every year Kansas Company manufactures…

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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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
Lakeside Inc. produces a product that currently sells for $72.00 per unit. Current production costs per unit include direct materials, $19; direct labor, $21; variable overhead, $9.50; and fixed overhead, $9.50. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 8,900 units at $50.20 per unit. Lakeside currently has unused production capacity. Required: a. Calculate the effect on Lakeside's operating income of accepting the order from the nonprofit organization. Increase in operating income b. Should Lakeside accept this special sales order? O Yes O No
Session Company uses 5,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $72,000 as follows: Direct materials $18,000 Direct labor $20,000 Variable MOH $10,000 Fixed MOH $24,000 Total costs $72,000 An outside supplier has offered to provide Part Y at a price of $12 per unit. If Session Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Accepting the outside supplier's offer leads to an annual advantage/disadvantage of: Advantage of $4,000 Disadvantage of $4,000 Disadvantage of $12,000 Advantage of $12,000
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
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,600 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,420 units of Product TLX and 5,995 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Product TLX Product MTV Selling price per unit $ 11.50 $ 6.90 Variable costs per unit 3.45 4.14 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.)
Jade Ltd. manufactures a product, which regularly sells for $67.75. This product has the following costs per unit at the expected production of 47,500 units: Cost Amount Direct labour $20.00 Direct materials 10.50 Manufacturing overhead (36% is variable) 24.00 The company has the capacity to produce 52,250 units. A wholesaler has offered to pay $77 for 12,000 units. If Jade Ltd. accepts this special order, operating income would increase (decrease) by how much?
Edidas Company needs 20,000 units of Part GX to use in producing one of its products. If Edidas buys the Part GX from McMillan Company for $79 instead of making it, Edidas will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Donald Mickey's decision. The cost per unit data are as follows: Cost to make the part Direct Materials Direct Labor (S) 30 15 Variable Overhead 20 Fixed Overhead 20 85 Required : 1. Explain which alternative is more attractive to Edidas, make or buy Part GX. 2. Assume there is new information that Edidas is negotiating to purchase cheaper raw materials from supplier (Twenty percent lower price). Is this information relevant or irrelevant? On the basis of financial considerations alone, should Edidas make or buy Part GX? Show your calculations 3. Based on requirement 2, what are relevant qualitative factors that Edidas should consider to decide whether to make or buy Part GX?…
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