Han Products manufactures 23,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unitfor part S-6 IsDirect materialsDirect labor-Variable manufacturing overhead$13.7011.002130Fixed manufacturing overheadTotal cost per part19.00$ 26.00An outside supplier has offered to sell 23,000 units of part S-6 each year to Han Products for $22 per part. If Han Products acceptsthis offer, the facilities now being used to manufacture part S-6 could be rented to another company for $73.000 per year However,Han Products determined two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part $-6were purchased from the outside supplier.Required:What is the financial advantage (disadvantage) of accepting the outside supplier's offer?Financial advantage

The relevant cost is the cost which differs between the two alternatives or is avoidable. If the…

Answered: Han Products manufactures 23.000 units…

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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Your Company has the capacity to produce 80,000 units. It produces and sells 70,000 units of a product each year. At this level of activity, Clark Company incurs the following unit costs: Direct materials $18 Direct labor 25 Variable overhead 9 Fixed overhead 10 Variable S&A 7 Fixed S&A 12 A special order for 9,000 units under consideration would require the one-time rental of a special machine. The rental is for $36,000. If the order is accepted, $5 of the variable S&A can be avoided. What is the least amount the company can charge per unit in this special pricing decision? (Think breakeven.) O $61 O $56 O $58 O $59 O $57
Chip Jones ahoy manufactures the cloth for sails. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year. The following information relates to current production: $175 Sales price per unit Variable costs per unit: Manufacturing Selling and administrative Total fixed costs: Manufacturing Selling and administrative LEFE $62 $20 $700,000 $250,000 Assume that a special pricing order is accepted for 5600 sails at a sales price of $150 per unit. This special order requires both variable manufacturing and variable selling and administrative costs, as well as incremental fixed costs of $400,000. What will be the impact on operating income? Operating income decreases by $380,800.
McGraw Company uses 7.750 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $135,750, computed as follows Direct materials: Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $ 23,250 41,000 An outside supplier has offered to provide Part X at a price of $19.10 per unit. If McGraw Company stops producing the part internally. one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost Outside purchase Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost 15,500 56,000 $ 135,750 Required: Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer Make Buy
Han Products manufactures 21,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: Direct materials$ 3.50Direct labor9.00Variable manufacturing overhead2.50Fixed manufacturing overhead9.00Total cost per part$ 24.00 An outside supplier has offered to sell 21,000 units of part S-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $71,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 5.00 Direct labor 11.00 Variable manufacturing overhead 6.00 Fixed manufacturing overhead 10.00 Total $32.00 Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231.(a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $enter a dollar amount Net relevant cost to buy $enter a dollar amount (b) Should Riverbed accept Ivanhoe’s offer?
Han Products manufactures 40,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per uni for part S-6 is: Direct materials Direct labor Variable manufacturing overhead $ 3.30 12.00 2.70 Fixed manufacturing overhead Total cost per part 6.00 $ 24.00 An outside supplier has offered to sell 40,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $90,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. Financial advantage $ 8,000 ×
Han Products manufactures 38,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.10 10.00 2.90 9.00 $ 25.00 An outside supplier has offered to sell 38,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company for $88,000 per year. However, Han Products determined two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? > Answer is complete but not entirely correct. Financial advantage $ 126,000
Penagos Corporation is presently making part Z43 that is used in one of its products. A total of 5,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials. Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead An outside supplier has offered to produce and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,000 of these allocated general overhead costs would be avoided. If management decides to buy part Z43 from the outside supplier rather than to…
Han Products manufactures 50,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is asfollows:Direct materials $ 5.50Direct labour 11.50Variable overhead 4.50Fixed overhead 10.20Total cost per part $31.70An outside supplier has offered to sell 43,500 units of part S-6 each year to Han Products for $28.00 per part. If Han Products accepts this offer, thefacilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $100,000. However, Han Products hasdetermined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required:1. What is the net dollar advantage or disadvantage of accepting the outside supplier’s offer? (Round "Total costs" and final answer to the nearestwhole dollar amount.)
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Company XYZ is currently producing and selling 100 units. At this level, the total direct materials cost is $500, the total direct labor cost is $1,800 and the total manufacturing overhead cost is $1,260, which includes $800 fixed manufacturing overhead cost. The company's total selling and administrative expenses are $2,800, which include $1,500 fixed selling and administrative costs. Assume that the company wishes to increase the number of units produced and sold to 102 units, what would be the incremental cost? (rounded to nearest ($) value) O a. 71 O b. 81 О с. None of the given answers O d. 41 О е. 55 AGE NEXT PAGE %3D ere to search
Alpha Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials £ 3.60Direct labour 10.00Variable overhead 2.40Fixed overhead 9.00Total cost per part £ 25.00 An outside supplier has offered to sell 30,000 units of part S–6 each year to AlphaProducts for £21 per part. If Alpha Products accepts this offer, the facilities now being used to manufacture part S–6 could be rented to another company at an annual rental of £80,000. However, Alpha Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S–6 were purchased from the outside supplier Required: (a) Prepare computations to show the net advantage or disadvantage of accepting the outside supplier’s offer. (b) Define the following terms: relevant cost and opportunity cost. (c) ‘If a product line is generating a loss, then that’s pretty good evidence that the…

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