Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,340 remotes is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total Cost $ 67,210 $ 56,870 $ 31,020 $ 51,700 $ 206,800 Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 2. Compute the difference in cost per unit between making and buying the remotes if $20,680 of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 3. What is the change in net income if fixed cost of $20,680 can be avoided and Frannie could rent out the factory space no longer in use for $20,680? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? Difference in cost Change in net income per unit
Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,340 remotes is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total Cost $ 67,210 $ 56,870 $ 31,020 $ 51,700 $ 206,800 Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 2. Compute the difference in cost per unit between making and buying the remotes if $20,680 of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 3. What is the change in net income if fixed cost of $20,680 can be avoided and Frannie could rent out the factory space no longer in use for $20,680? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? Difference in cost Change in net income per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Question
Transcribed Image Text:Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,340
remotes is as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
Cost
$ 67,210
$ 56,870
$ 31,020
$ 51,700
$ 206,800
Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit.
Required:
1. Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is
the change in net income, if Frannie Fans buys the remotes?
2. Compute the difference in cost per unit between making and buying the remotes if $20,680 of the fixed costs can be avoided.
What is the change in net income, if Frannie Fans buys the remotes?
3. What is the change in net income if fixed cost of $20,680 can be avoided and Frannie could rent out the factory space no longer in
use for $20,680?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided.
What is the change in net income, if Frannie Fans buys the remotes?
Difference in cost
Change in net income
per unit
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