Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 5.00 Direct labor 11.00 Variable manufacturing overhead 6.00 Fixed manufacturing overhead 10.00 Total $32.00 Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231. (a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $enter a dollar amount Net relevant cost to buy $enter a dollar amount (b) Should Riverbed accept Ivanhoe’s offer
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:
| Direct materials | $ 5.00 | ||
| Direct labor | 11.00 | ||
| Variable manufacturing |
6.00 | ||
| Fixed manufacturing overhead | 10.00 | ||
| Total | $32.00 |
Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231.
(a) Calculate total relevant cost to make and net cost to buy.
|
Total relevant cost to make
|
$enter a dollar amount |
|---|---|
|
Net relevant cost to buy
|
$enter a dollar amount |
(b) Should Riverbed accept Ivanhoe’s offer?
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