Exercise 13-11 (Algo) Make or Buy Decision [LO13-3]Han Products manufactures 31,000 units of part S-6 each year for use on its production line. At this level of activity,the cost per unit for part S-6 Is:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadTotal cost per part$ 3.508.002.506.00$ 20.00An outside supplier has offered to sell 31,000 units of part S-6 each year to Han Products for $18 per part. If HanProducts accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another companyat an annual rental of $81,000. However, Han Products has determined that two-thirds of the fixed manufacturingoverhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.Required:What is the financial advantage (disadvantage) of accepting the outside supplier's offer?

Question:Han Products manufactures 31,000 units of part S-6 each year for use on its production…

Answered: Exercise 13-11 (Algo) Make or Buy…

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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QUESTION 7 Quiet Corp. currently makes 2000 subcomponents a year in one of its factories. The unit costs to produce are: Description Per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $4 4 2 IMI An outside supplier has offered to provide Quiet Corp. with the 2000 subcomponents at a $17 per unit price. Fixed overhead is not avoidable. If Quiet Corp. decides to buy from the outside supplier, the impact to net income will be ? If positive, enter the number, if negative, place a-sign before your number
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Exercise 7-13 (Algo) Computing ABC Product Costs [LO7-3, LO7-4] Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours Hubs Sprockets per Unit 0.50 0.10 Annual Production 28,000 units 60,000 units Additional information about the company follows: a. Hubs require $23 in direct materials per unit, and Sprockets require $12. b. The direct labor wage rate is $14 per hour. c. Hubs require special equipment and are more complex to manufacture than Sprockets. d. The ABC system has the following activity cost pools: Estimated Overhead Activity Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) Cost $ 25,200 Hubs Sprockets Total 140 112 252 $ 171,500 4,900 0 $ 122,000 NA NA 4,900 NA General factory (organization-sustaining) Required: 1. Compute the activity rate for each activity cost pool. 2. Determine the unit product cost of each product according to the ABC system.…
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Exercise 21.12 (Static) Pricing a Special Order (LO21-1, LO21-2, LO21-3) Mazeppa Corporation sells relays at a selling price of $28 per unit. The company's cost per unit, based on full capacity of 160,000 units, is as follows: Direct materials Direct labor Overhead (2/3 of which is variable) Mazeppa has been approached by a distributor in Montana offering to buy a special order consisting of 30,000 relays. Mazeppa has the capacity to fill the order. However, it will incur an additional shipping cost of $2 for each relay it sells to the distributor. a-1. Assume that Mazęppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit? a-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor? b-1. Assume that Mazeppa is currently operating at full capacity.…
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TB MC Qu. 13-54 (Static) Sardi Incorporated is considering whether to continue... Sardi Incorporated is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 17,000 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 70% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 2 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 4 minutes on this machine and that has a contribution margin of $7.00 per unit. When deciding whether to make or buy the component, what cost of making the component should be…
Relevant Range and Fixed and Variable Costs Vogel Inc. manufactures memory chips for electronic toys within a relevant range of 61,600 to 100,800 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Components produced 61,600 79,200 100,800 Total costs: Total variable costs . . . . . . . . . $19,712 (d) (j) Total fixed costs . . . . . . . . . . . . 22,176 (e) (k) Total costs . . . . . . . . . . . . . . . . . $41,888 (f) (l) Cost per unit: Variable cost per unit . . . . . . . (a) (g) (m) Fixed cost per unit . . . . . . . . . . (b) (h) (n) Total cost per unit . . . . . . . . . . (c) (i) (o) Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar. Cost Report Components produced 61,600 79,200 100,800 Total costs: Total variable costs $19,712 (d)…
Question 2 Pisang Berhad produces 500,000 switches per year with the following costs: (For the production of 500,000 switches) RM Direct materials 1,000,000 Direct labour 750,000 Variable manufacturing expenses 300,000 450,000 Fixed manufacturing expenses Total cost 2,500,000 RM5/unit Cost/per unit RM2,500,000/500,000 units + A supplier has approached the company, and offered the switches at RM4 per unit. Should the company decided to purchase from the supplier, the company need to employ an incoming quality controller with a salary of RM70,000 per annum. Other than this, all the other fixed manufacturing expenses will remain unchanged. Required: a) Should Pisang Berhad continue with the production of switches internally, or to purchase the switches from the external supplier? Support your answer with appropriate calculations. b) Will your answer change if the facilities freed up by the company can be used to do alternative works that will contribute an annual profit of RM50,000? Why?…
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