FrigidAid manufactures ice-makers for installation in refrigerators. The costs per unit, for 26,000units of ice-makers, are as follows:Direct materials$9Direct labor16Variable overhead7Fixed overhead13Total costs$45Arctic Boxes Inc. has offered to sell 26,000 ice-makers to FrigidAid for $36 per unit. If FrigidAidaccepts Arctic Boxes' offer, the facilities used to manufacture ice-makers could be used toproduce water filtration units. Revenues from the sale of water filtration units are estimated at$104,000, with variable costs amounting to 60% of sales. In addition, $8 per unit of the fixedoverhead associated with the manufacture of ice-makers could be eliminated.For FrigidAid to determine the most appropriate action to take in this situation, the total relevantcosts of make vs. buy, respectively, areSelect one:O a. $1,040,000 vs. $894,400O b. $842,400 vs. $894,400O c. $1,144,000 vs. $728,000WOd. $1,040,000 vs. $936,000

A. 1,040,000 vs 894,400 Relevant Costs Costs to make Costs to buy Direct materials…

Answered: FrigidAid manufactures ice-makers for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The James Company manufactures widgets that sell for $120 each. The company's unit cost for each widget is as follows: A company in another state has offered to purchase 1,000 widgets from James Company at a cost of $90 each. If James were to accept this special order, no additional Fixed Manufacturing Overhead costs would be incurred. Should James accept this special order? Show relevant calculations.
Ahrends Corporation makes 44,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials $ 23.80 Direct labor 27.70 Variable manufacturing overhead 8.70 Fixed manufacturing overhead 39.70 Unit product cost $ 99.90 An outside supplier has offered to sell the company all of these parts it needs for $86.20 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $286,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $34.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's…
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently: Direct material Direct labor Manufacturing overhead Total The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All other dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). 1. What is Oat Treats' relevant cost? $14,000 6,000 8,000 $28,000 2. What does Simmons Cereal's offer cost? 3. If Oat Treats accepts the offer, what will the effect on profit be? o Incremental dollar amount = o Increase or Decrease? no quotes. Please note: Your answer is either "Increase" or…
Specter Company makes 20,000 units per year of a part it uses in the products it manufactures.The unit product cost of this part is computed as follows:Direct materials $25.10Direct labour 18.20Variable manufacturing overhead 2.40Fixed manufacturing overhead 13.40Unit product cost $56.70An outside supplier has offered to sell the company all these parts it needs for $56.00 a unit. Ifthe company accepts this offer, the facilities now being used to make the part could be used tomake more units of a product that is in high demand. The additional contribution margin on thisother product would be $50,000 per year.If the part were purchased from the outside supplier, all the direct labour cost of the part wouldbe avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the partwould continue even if the part were purchased from the outside supplier. This fixedmanufacturing overhead cost would be applied to the company's remaining products.Required:Part a:Calculate…
Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8,700 units per year for $10.00 each. Mohave the following information about the cost of producing tote bags: Direct materials $ 6.00 Direct labor 2.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 1.50 Total cost per unit $ 10.50 Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1) Based on the incremental analysis, should Mohave buy the tote bags or continue making them? 2) Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000 in annual profits. Recompute the difference in cost…
Ahrends Corporation makes 43,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 12.80 23.30 2.10 26.50 $ 64.70 An outside supplier has offered to sell the company all of these parts it needs for $51.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $301,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $23.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…
Al-Rafidain Company produces a fax machine, and the device's manufacturing process is part S, and the company estimates that it is for 100,000 units of the fax machine annually. The company can purchase all its needs of the tooth piece from an external supplier at a price of 9 dinars per piece. The company also estimates that there are additional costs in the case of purchase amounting to one dinar per piece, in exchange for shipping and checking the piece. The company can manufacture the part internally, and the following are the estimated costs of the manufacturing process The quantity that the company needs, amounting to 100,000 pieces total costs 400,000 dinars 200,000 200,000 350,000 1,150,000 dinars cost per piece 4 dinars 2 2 3.5 11.5 dinars direct material direct action Variable indirect industrial costs The share of the industrial costs is fixed the total Assuming that the fixed industrial costs will remain the same in the case of choosing an alternative to purchase from…
Blossom Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as follows. Direct materials $29,800 Direct labor $29,940 Variable overhead Fixed overhead Instead of making the switches at an average cost of $2.90 ($181,540 ÷ 62,600), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $45,400 $76,400 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).) Net Income Increase (Decrease) Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount Make…
The Wolverine Corporation is working at full production capacity producing 9,000 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Wolverine to produce 3,500 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Wolverine $31 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Requirement 1. What is the opportunity cost to Wolverine of producing the 3,500 units of Stronglast? (Assume that no overtime is worked.) Determine the formula for calculating the opportunity cost, then calculate the opportunity cost of producing the 3,500 units of Stronglast Selling price per unit Total variable cost per unit Units 3,500 38 $ 20 ( ($ Selling price per unit Total variable cost per unit Contribution margin per unit Contribution margin…

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS