I need help on this: Allen Coporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops need each year follow: Nylon fabric $270,000 Aluminum tubing 96,000 Frame fittings 24,000 Direct labor 162,000 Variable manufacturing overhead 30,000 Fixed manufacturing overhead 180,000 Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable quality for $390 each, FOB shipping point. Allen would furnish its own trademark insignia at a unit cost of $12. Transportation would be $18 per unit, paid by Allen Corporation. Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead could be avoided if the topos are purchased. The tops have been made in a remote section of Allen's factory building, using equipment for which no alternative use is apparent in the forseeable future. Required a) Prepare a differential analysis showing wheter or not you would recommend that that convertible tops be purchased from Dustin Company. b) Assuming that the production capacity released by purchasing the tops could be devoted to a subcontracting job for another company that netted a contribution margin of $42,000, what maximum purchase price could Allen Corporation pay for the tops? c) Identify two important qualitative factors that Allen Corporation should consider in deciding whether to purchase the needed tops.
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.
I need help on this:
Allen Coporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops need each year follow:
| Nylon fabric | $270,000 |
| Aluminum tubing | 96,000 |
| Frame fittings | 24,000 |
| Direct labor | 162,000 |
| Variable manufacturing |
30,000 |
| Fixed manufacturing overhead | 180,000 |
Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable quality for $390 each, FOB shipping point. Allen would furnish its own trademark insignia at a unit cost of $12. Transportation would be $18 per unit, paid by Allen Corporation.
Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead could be avoided if the topos are purchased. The tops have been made in a remote section of Allen's factory building, using equipment for which no alternative use is apparent in the forseeable future.
Required
a) Prepare a differential analysis showing wheter or not you would recommend that that convertible tops be purchased from Dustin Company.
b) Assuming that the production capacity released by purchasing the tops could be devoted to a subcontracting job for another company that netted a contribution margin of $42,000, what maximum purchase price could Allen Corporation pay for the tops?
c) Identify two important qualitative factors that Allen Corporation should consider in deciding whether to purchase the needed tops.
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