Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available: 1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit. 2. The unit cost of manufacturing the solenoids is $20, computed as follows:
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- Rolertyme Company manufactures roller skates. With the exception of the rollers, all parts of the skates are produced internally. Neeta Booth, president of Rolertyme, has decided to make the rollers instead of buying them from external suppliers. The company needs 100,000 sets per year (currently it pays 1.90 per set of rollers). The rollers can be produced using an available area within the plant. However, equipment for production of the rollers would need to be leased (30,000 per year lease payment). Additionally, it would cost 0.50 per machine hour for power, oil, and other operating expenses. The equipment will provide 60,000 machine hours per year. Direct material costs will average 0.75 per set, and direct labor will average 0.25 per set. Since only one type of roller would be produced, no additional demands would be made on the setup activity. Other overhead activities (besides machining and setups), however, would be affected. The companys cost management system provides the following information about the current status of the overhead activities that would be affected. (The supply and demand figures do not include the effect of roller production on these activities.) The lumpy quantity indicates how much capacity must be purchased should any expansion of activity supply be needed. The purchase price is the cost of acquiring the capacity represented by the lumpy quantity. This price also represents the cost of current spending on existing activity supply (for each block of activity). Production of rollers would place the following demands on the overhead activities: Producing the rollers also means that the purchase of outside rollers will cease. Thus, purchase orders associated with the outside acquisition of rollers will drop by 5,000. Similarly, the moves for the handling of incoming orders will decrease by 200. The company has not inspected the rollers purchased from outside suppliers. Required: 1. Classify all resources associated with the production of rollers as flexible resources and committed resources. Label each committed resource as a short- or long-term commitment. How should we describe the cost behavior of these short- and long-term resource commitments? Explain. 2. Calculate the total annual resource spending (for all activities except for setups) that the company will incur after production of the rollers begins. Break this cost into fixed and variable activity costs. In calculating these figures, assume that the company will spend no more than necessary. What is the effect on resource spending caused by production of the rollers? 3. Refer to Requirement 2. For each activity, break down the cost of activity supplied into the cost of activity output and the cost of unused activity.Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available: 1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit. 2. The unit cost of manufacturing the solenoids is $20, computed as follows: Direct materials Direct labor Factory overhead: Variable Fixed Total manufacturing costs Cost per unit ($400,000 ÷ 20,000 units) 3. If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs but only 75 percent of the variable factory overhead costs. 4. If the solenolds are purchased from the outside source, machinery used in the production of solenoids will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $5,000…Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available. The company needs 18,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $14 per unit. The unit cost of manufacturing the solenoids is $20, computed as follows. Direct materials $ 162,000 Direct labor 36,000 Factory overhead: Variable 72,000 Fixed 90,000 Total manufacturing costs $ 360,000 Cost per unit ($360,000 ÷ 18,000 units) $ 20 If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs, but will eliminate only 60 percent of the variable factory overhead costs. If the solenoids are purchased from the outside source, machinery used in the production of solenoids will be sold at its…
- This Little Light, Inc. is a manufacturer of lamps. Little Light makes 40,000 units per year of a part that it uses in the manufacturing of each lamp. At this activity level, the unit production cost is $7.17. Of this amount, $4.71 is for unit variable production costs. The remainder is for fixed production costs and equals $98,400. Little Light has identified an outsider supplier who sells the needed part. If the part is purchased from the outsider supplier, 15% of Little Light's fixed manufacturing costs will be eliminated. Assume Little Light will need 50,000 of the part next year and that the freed up capacity can be rented out to another company for $31,740. At what purchase price will Little Light be economically indifferent between making the part and buying the part? $4.70 $4.86 $5.97 $5.50 $5.64K Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,400 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs $49. The cost of each light is $0.95. The holding cost is $0.15 per light per year. a) What is the optimal size of the production run? units (round your response to the nearest whole number).Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3.50 per unit. Enough capacity exists in the company’s plant to produce 30,100 units of the toy each month. Variable expenses to manufacture and sell one unit would be $2.20, and fixed expenses associated with the toy would total $58,195 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30,100 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,910 per month. Variable expenses in the rented facility would total $2.45 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. What is the monthly break-even point for the new toy in unit sales and dollar sales. 2. How many units must be sold each month to attain a target…
- Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $2.70 per unit. Enough capacity exists in the company's plant to produce 30,400 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.72, and fixed expenses associated with the toy would total $44,188 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30,400 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,209 per month. Variable expenses in the rented facility would total $1.89 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. What is the monthly break-even point for the new toy in unit sales and dollar sales. 2. How many units must be sold each month to attain a target profit…Triple X Company manufactures and sells refrigerators. It makes some of the parts for the refrigerators and purchases others. The engineering department believes it might be possible to cut costs by manufacturing one of the parts currently being purchased for $8.25 each. The firm uses 100,000 of these parts each year. The accounting department compiles the followinglist of costs based on engineering estimates:Fixed costs will increase by $50,000.Labor costs will increase by $125,000.Factory overhead, currently running $500,000 per year, may be expected to increase 12 percent. Raw materials used to make the part will cost $600,000.Given the preceding estimates, should Triple X make the part or continue to buy it?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
- A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data:Option A: Purchase 10,000 items per year at a fixed price of $8.50 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials = $5.00 per item and direct labor = $1.50 per item. Manufacturing overhead is $3.00 per item. Based on these data, should the item be purchased or manufactured?Noblesya Co. produces 1,000 parts per year, which are used in the assembly of one ofits products. The unit product cost of these parts are: Variable manufacturing cost,P12.00; fixed manufacturing cost, P9.00. The part can be purchased from an outsidesupplier at P20.00. If the part is purchased from the outside supplier, two thirds of thefixed manufacturing costs can be eliminated. What would be the annual impact on thecompany’s net operating income as a result of buying the part from the outside supplier? provide solutionHomerun Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows: (Click to view the costs.) Read the requirements. Requirement 1. Suppose Homerun is currently producing and selling 38,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Cobb Corporation wants to place a one-time special order for 12,000 bats at $20 each. Homerun will incur no variable selling costs for this special order. Should Homerun accept this one-time special order? Show your calculations. Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Data Table Increase (decrease) in operating income if order is accepted Cost per Bat Total Costs Homerun should Cobb's special order because it operating income by $ Direct materials 11 $ 550,000…