Finch Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost ofproducing 9,200 containers follows.Unit-level materialsUnit-level laborUnit-level overheadProduct-level costs*Allocated facility-level costs$ 6,4006,0004,00011,40027,300*One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Finch for $2.70 each.Requireda. Calculate the total relevant cost. Should Finch continue to make the containers?b. Finch could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month,calculate the total avoidable costs. Should Finch continue to make the containers?a. Total relevant costShould Finch continue to make the containers?b. Total avoidable costShould Finch continue to make the containers?

When choosing whether to create a product domestically or purchase it from a third party, a…

Answered: Finch Electronics currently produces…

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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The Wood Division of Bramble Corp. manufactures rubber moldings and sells them externally for $50. Its variable cost is $31 per unit, and its fixed cost per unit is $6. Bramble’s president wants the Wood Division to transfer 4200 units to another company division at a price of $24.Assuming the Wood Division has available capacity of 4200 units, the minimum transfer price it should accept is $6. $24. $31. $50.
The Southern Division of Barstol Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 31,000 units and the variable cost of each unit is $48. Presently the Southern Division sells 29,000 units per year to outside customers at $60 per unit. The Northern Division of Barstol Company would like to buy 16,000 units a year from Southern to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. The lowest acceptable transfer price from the standpoint of the Southern Division should be closest to: Multiple Choice $48.00 per unit $58.50 per unit $22.50 per unit $60.00 per unit
Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit. Required: a) Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain.b) An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations.c) How do your answers in parts (a) and (b) relate to the theory of constraints?…
Crane Company uses 9000 units of Part A in producing its products. A supplier offers to make Part A for $5. CraneCompany has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the relevant cost of buying Part A from the supplier is $72000. $45000. $27000. $0.
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.80 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 141,450 $ 188,325 Variable cost per switch 0.57 0.25 Required: For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? What volume level would produce the same total costs regardless of the machine purchased? What is the most profitable alternative for producing 155,000 switches per year and what is the total cost of that alternative
The Mighty Music Company produces and sells a desktop speaker for $200. The company has the capacity to produce 60,000 speakers each period. At capacity, the costs assigned to each unit are as follows: Unit-level costs Product-level costs Facility-level costs The company has received a special order for 11,000 speakers. If this order is accepted, the company will have to spend $20,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? Multiple Choice O O $96.82 $146.82 $104.32 $95 $25 $15 $107.32
Lights Incorporated calculates cost for an equivalent unit of production using the weighted-average method. Sunshine Company, maker of high-quality eyewear, incurs fixed costs of $24 and variable costs of $48 in making one unit of its matrix line of sunglasses, based on current demand of 100,000 units per year. Sunshine Company's major supplier has offered to make all 100,000 matrix sunglasses for $55 each. If Smith accepts the offer of the supplier, it will save $4 per unit in fixed costs. Based solely on this information, what is the recommended decision and how much will be saved based on this decision?
Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows. Direct materials $30,000 Variable overhead $45,000 Direct labor $42,000 Fixed overhead $60,000 Instead of making the switches at an average cost of $2.95 ($177,000 ÷ 60,000), the company has an opportunity to buy the switches at $2.7 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net IncomeIncrease (Decrease) Direct materials $ $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total…
Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit. Required: Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain. An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations. How do your answers in parts (a) and (b) relate to the theory of constraints? Explain.
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)?
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 30,000 parts is $100,000, which includes fixed costs of $40,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income? A. decrease of $8,000 B. decrease of $24,000 C. increase of $16,000 D. increase of $24,000
The Slate Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65 per screen. The SD can sell all its output to the outside market at a price of $100 per screen, after incurring a variable marketing and distribution cost of $8 per screen. If the AD purchases screens from outside suppliers at a price of $100 per screen, it will incur a variable purchasing cost of $7 per screen. Slate’s division managers can act autonomously to maximize their own division’s operating income. Q. Now suppose that the SD can sell only 70% of its output capacity of 20,000 screens per month on the open market. Capacity cannot be reduced in the short run. The AD can assemble and sell more than 20,000 TV sets per month. a. From the point of view of Slate’s management, how much of the SD output should be transferred to the AD?

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