Gelb Company currently manufactures 47,500 units per year of a key component for its manufacturing process.Variable costs are $4.05 per unit, fixed costs related to making this component are $85,000 per year, and allocatedfixed costs are $70,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys thiscomponent. The company is considering buying this component from a supplier for $3.70 per unit.Calculate the total incremental cost of making 47,500 units and buying 47,500 units. Should it continue tomanufacture the component, or should it buy this component from the outside supplier?Complete this question by entering your answers in the tabs below.OutsideSupplierCalculate the total incremental cost of making 47,500 units. (Round "variable cost per unit" answers to 2 decimal places.)Incremental Costs to MakeRelevantAmount perUnitCosts to Make Costs to BuyVariable cost per unitFixed manufacturing costsTotal incremental cost to makeRelevantFixed CostsCosts to MakeTotal RelevantCosts$0Costs to Buy >

Incremental cost: Incremental cost is the additional cost incurred by the company if it produces…

Answered: Gelb Company currently manufactures…

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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Division A has the capacity to produce 120,000 units. The normal selling price of each unit is P80. The variable cost incurred for each unit is P42. Total direct fixed cost for the relevant range is P1,150,000. Division B can use the products of Division A as an input in its manufacturing process but is currently acquiring the said products from an outside supplier. The price per unit is P75. Total annual demand is 30,000 units. Assuming sufficient capacity, what is the minimum acceptable transfer price to Division A? Assuming only 22,500 excess capacity, what is the minimum acceptable transfer price to Division A? Assuming only 22,500 excess capacity and that Division A can avoid variable selling cost per unit of P4 but will incur a one-time fixed cost of P30,000 for the order, what is the minimum acceptable transfer price to Division A? Assuming no excess capacity, what is the minimum acceptable transfer price to Division A? What is the maximum acceptable transfer…
Tom's Toolery is operating at 70% of its productive capacity. It is currently paying $23 per unit for a part used in its manufacturing operation. Tom's estimates it could make the part internally for a total cost of $26 per unit, consisting of $19 of unit-level production costs and $7 of facility-level costs that are currently attributed to other products. Tom's usually purchases 51,000 units of the part each year. These units could be manufactured using Tom's excess capacity. What is the effect on cost if the company decides to start making the part? Multiple Choice $204,000 cost decrease $102,000 cost increase $204,000 cost increase $1,020,000 cost increase
Frank Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit. The unit cost for Frank Co. to make the part is $30, which includes $4 of fixed costs. If 20,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it? a. $40,000 decrease b. $50,000 increase c. $20,000 increase d. $30,000 increase
Bonita Company manufactures a product with a unit variable cost of $43 and a unit sales price of $75. Fixed manufacturing costs were $79500 when 7950 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would notaffect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $43000 $1000 $11000 $7950
Bramble Company manufactures a product with a unit variable cost of $41 and a unit sales price of $75. Fixed manufacturing costs were $79800 when 7980 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $13000 $41000 $3000 $23940
Amarjit Truckers, Ltd. operates a fleet of delivery trucks in North America. The company has determined that, if a truck is driven 120,000 kilometres during a year, the average operating cost is 18.000 cents per kilometre. If a truck is driven only 50,000 kilometres during a year, the average operating cost increases to 21.0 cents per kilometre. Required: 1. Using the high - low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 2. Express the variable and fixed costs in the form Y = a + bX. (Do not round intermediate calculations. Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) 3. If a truck were driven 80,000 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round "Total annual cost" to 2 decimal places.)
A global manufacturer of electrical switching equipment(ESE) is considering outsourcing the manufacturing ofan electrical breaker used in the manufacturing of switchboards. The company estimates that the annual fixed cost ofmanufacturing the part in-house, which includes equipment,maintenance, and management, amounts to $8 million. Thevariable cost of labor and materials are $11.00 per breaker.The company has an offer from a major subcontractor to pro-duce the part for $16.00 per breaker.a. How many breakers would the electrical switching equip-ment company need per year to make the in-house optionthe least costly?b. Assume the subcontractor wants the company to share inthe costs of the equipment. The ESE company estimatesthat the total annual cost would be $5 million, whichalso includes management oversight for the new supplycontract. For this concession, the subcontractor will dropthe per-unit price to $12.00. Under this assumption, howmany breakers would the ESE company need per…

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