**Penagos Corporation: Cost Analysis for Part Z43**Penagos Corporation is currently manufacturing part Z43, used in one of their products, with an annual production and usage of 5,000 units. The company's Accounting Department has provided the following cost breakdown per unit at this production level:| **Cost Item** | **Per Unit** ||--------------------------------------|-------------|| Direct materials | $1.10 || Direct labor | $1.10 || Variable overhead | $0.90 || Supervisor's salary | $6.90 || Depreciation of special equipment | $5.80 || Allocated general overhead | $5.60 |**Situation:**An external supplier has proposed to supply part Z43 for $20.80 per unit. Acceptance of this offer would render the supervisor's salary and all variable costs, including direct labor, avoidable. The special equipment, currently used for production, would become obsolete, having neither salvage value nor alternative use. Additionally, only $4,000 of the allocated general overhead costs would become avoidable, as the rest are considered fixed costs of the company.**Question:**If the management opts to buy part Z43 from the external supplier instead of manufacturing it, what would be the annual financial advantage or disadvantage?**Multiple Choice Options:**- $-\$34,500$- $-\$30,500$- $-\$15,500$Note: The negative values in parentheses represent potential financial disadvantages.

Make or buy is the decision to be made by the entities to decide that the products if made will be…

Answered: in one of fts products. A total of…

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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Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 20,000 units or 44,000 direct labor hours): Direct materials (2.7 pounds at $20) $ 54.00 Direct labor (2.2 hours at $80) 176.00 Variable overhead (2.2 hours at $30) 66.00 Fixed overhead (2.2 hours at $40) 88.00 Standard cost per unit $ 384.00 Budgeted selling and administrative costs: Variable $ 4 per unit Fixed $ 1,800,000 Expected sales activity: 18,000 units at $500 per unit Desired ending inventories: 12% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following…
Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 31,000 units or 52,700 direct labor hours): Direct materials (2.5 pounds at $18) $ 45.00 Direct labor (1.7 hours at $70) 119.00 Variable overhead (1.7 hours at $20) 34.00 Fixed overhead (1.7 hours at $30) 51.00 Standard cost per unit $ 249.00 Budgeted selling and administrative costs: Variable $ 8 per unit Fixed $ 1,600,000 Expected sales activity: 27,000 units at $380 per unit Desired ending inventories: 18% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following…
9. A company estimates that it will incur…
Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 20,000 units or 44,000 direct labor hours): Direct materials (2.7 pounds at $20) $ 54.00 Direct labor (2.2 hours at $80) 176.00 Variable overhead (2.2 hours at $30) 66.00 Fixed overhead (2.2 hours at $40) 88.00 Standard cost per unit $ 384.00 Budgeted selling and administrative costs: Variable $ 4 per unit Fixed $ 1,800,000 Expected sales activity: 18,000 units at $500 per unit Desired ending inventories: 12% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following…
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exercise can you help me with the solution? Huron Company produces a cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 18.00 per hour $ 3.60 During the most recent month, the following activity was recorded: Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. All of the material purchased was used to produce 4,000 units of Zoom. 750 hours of direct labor time were recorded at a total labor cost of $14,925. Required: Compute the materials price and quantity variances for the month. Compute the labor rate and efficiency variances for the month. Note: For all requirements, Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive…
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A company is considering buying a part that they currently make for one of their products. The costs of producing the 8,900 units of the part that are needed every year are as follows. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $8.20 $ 4.60 $9.10 $ 3.40 $ 2.98 $ 1.60 An outside supplier has offered to make the part and sell it to the company for $28.00 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 $4,100 of these allocated general overhead costs would be avoided. In addition, the space used to produce the part could be used to make more of one of the company's other products,…
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Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 20,000 units or 44,000 direct labor hours): Direct materials (2.7 pounds at $20) $ 54.00 Direct labor (2.2 hours at $80) 176.00 Variable overhead (2.2 hours at $30) 66.00 Fixed overhead (2.2 hours at $40) 88.00 Standard cost per unit $ 384.00 Budgeted selling and administrative costs: Variable $ 4 per unit Fixed $ 1,800,000 Expected sales activity: 18,000 units at $500 per unit Desired ending inventories: 12% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following…
Jumbo Co. sells a special toy product in Hong Kong. The cost information for the current year is as follows: Direct materials at $12 per poundDirect labour at $10 per hourVariable manufacturing overheadsVariable selling and administrative overheads Fixed manufacturing overheads Fixed selling and administrative overheads 2 pounds per unit 4 hours per unit$5 per direct labour hour $18 per unit $2,000,000 per year $1,000,000 per year A supplier selling production machines has offered Jumbo Co. a new model of the machine which can improve productivity by reducing one hour of labour time per unit. The renting cost of this new machine will incur an extra cost of $45,000 per month. Currently the annual sales quantity is 60,000 units and the selling price is $300 each. Your manager is seeking your advice for the replacement of the machine. Required: (a) Calculate the change in Net Profit resulting from the replacement of the machine. Indicate whether it is an Increase or a…
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