It costs P450,000 to make 150,000 units of a part in the plant. This cost includes material of P90,000 direct labor of P120,000, variable overhead of P15,000 and P225,000 in fixed overhead inclusive of P45,000 in depreciation and common overhead allocation of P150,000. The balance is for the section supervisor’s salary. The part can be purchased for P20 per unit. If the part is purchased, the space released can be rented for P65,000. If the part is purchased, the company’s profit will

It costs P450,000 to make 150,000 units of a part in the plant. This cost includes material of P90,000 direct labor of P120,000, variable overhead of P15,000 and P225,000 in fixed overhead inclusive of P45,000 in depreciation and common overhead allocation of P150,000. The balance is for the section supervisor’s salary. The part can be purchased for P20 per unit. If the part is purchased, the space released can be rented for P65,000. If the part is purchased, the company’s profit will

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 4CDQ: How would each of the following costs be classified if units produced is the activity base? a....

See similar textbooks

Similar questions

It costs P450,000 to make 15,000 units of a part in this plant. This cost includes material of P90,000, direct labor of P120,000, variable overhead of 15,000, and P225,000 in fixed overhead inclusive of P45,000 in depreciation and common overhead allocation of P150,000. The balance is for the section supervisor's salary. The part can be purchased for P20 a unit. If the part is purchased, the space released can be rented for P65,000. If the part is purchased, the company will a. lose P20,000 b. lose P45,000 c. gain P20,000 d. gain P45,000
A manufacturer has been offered a contract to manufacture a certain product that will utilize the waste materials from his present product. The new product will use 0.3kg of waste materials per unit which is presently sold by the company for P2.00 per kg. Other materials to be used will cost P0.80 per unit. Direct labor per unit will cost P2.30. The present overhead costs of the company amount to P380,000 plus 40% of the total for direct materials and direct labor costs per year. The buyer will pay the manufacturer per unit an amount equal to the increment costs plus P1.20 profit. Determine the selling price of the manufacturer per unit.
Beto Company pays $6.90 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $7.80 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should: Make Buy
A company currently pays $5 per unit to buy a key part for a product it manufactures. It can make the part for $1.50 per unit for direct materials and $2.50 per unit for direct labor. The company normally allocates overhead costs at the rate of 50% of direct labor. Incremental overhead costs to make this part are $0.75 per unit. Should the company make or buy the part?
Beto Company pays $3.50 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $2.70 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part? (a) Make or Buy Analysis Make Buy Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference |(b) Company should:
Beat Company manufactures 8,000 units of a certain component per year. This component is used in the production of the main product. The following are the costs to make the component per unit: Direct materials $4 Direct labor $4 Variable overhead $3 Fixed overhead $5 If Beat Company buys the component from an outside supplier, the company can rent out the released facilities for P12,360 a year. The cost of the component per unit as quoted by the supplier is P15. 25% of fixed overhead applied in the manufacture of the component will continue regardless of what decision is made. For all purchase made by the company, freight and handling costs are applied at 2% of the purchase price. The direct materials cost presented above is exclusive of such freight and handling cost. What is the advantage or disadvantage of buying the component?A. P12,240 advantage B. 24,600 advantage C. 5,400 disadvantage D. 8,600 advantage
Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent:Direct materials $8400 Direct Labor $11,250 Variable overhead $12,600 Fixed overhead $16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente accepts the offer, by how much will net income increase (decrease)? $3,750 $19,950 $(8,850) $(2,850)
Scott Corporation produces a part for use in the production of one of its products. The per-unit costs associated with the annual production of 1,000 units of this part are as follows: Direct Materials $10.50 $24.00 Direct labor Variable factory overhead $5.50 Fixed factory overhead $12.00 Total Costs $52.00 $5,000 of the fixed factory overhead costs associated with the production of this product are common fixed costs. Larson Company has offered to sell 1,000 units of the same part to Scott Corporation for $42 per unit. Scott should: Select one: a. buy the part, because this would save $10.00 per unit. X b. buy the part, because this would save the company $5,000 annually. c. make the part, because this would save the company $5,000 annually. d. make the part, because this would save $2.00 per unit.
Charge Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are given below. The fixed factory overhead costs are unavoidable. Another company has offered to sell 5,000 units of the same part to Charge Company for $15 per unit. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Charge Company should Per Unit Direct materials $3.00 Direct labor 5.00 Variable factory overhead Fixed factory overhead Total costs 4.00 2.00 $14.00 buy the part and rent facilities to save $5,000 ) make the part to save $15,000 O buy the part and rent facilities to save $15,000 make the part to save $5,000 O make the part to save $10,000 O
A company is planning to bid for a one-month contract. It has sufficient spare labour and machine capacity to carry out the contract without affecting other activities. Costs associated with the contract would be as follows: Direct materials Direct labour Variable overheads Depreciation $ 12,440 18,300 6,020 2,000 In addition, it is estimated that a supervisor will need to spend 50% of their time on that contract. The supervisor is paid $3,500 a month. What is the relevant cost of the contract? O $18,460 O $14,190 O $12,440 O $20,210
ABC Company manufactures Part AA for use in its production cycle. The costs per unit for 25,000 units for the part are as follows: Direct materials P 7.50 Direct labor 37.50 Variable overhead 15.00 Fixed overhead 20.00 XYZ Company has offered to sell ABC Company the 25,000 units needed by the latter for P75 per unit. If ABC Company accepts the offer, the released facilities could be rented out in the amount of P112,500. In addition, P12.50 per unit of fixed overhead applied to part AA would be eliminated or avoided. What alternative is more desirable and by what amount it is more desirable? Buy – P 50,000 Make – P50,000 Buy – P262,500 Make – P 262,500 Group of answer choices 1 2 3 4
ABC Company manufactures Part AA for use in its production cycle. The costs per unit for 25,000 units for the part are as follows: Direct materials P 7.50 Direct labor 37.50 Variable overhead 15.00 Fixed overhead 20.00 XYZ Company has offered to sell ABC Company the 25,000 units needed by the latter for P75 per unit. If ABC Company accepts the offer, the released facilities could be rented out in the amount of P112,500. In addition, P12.50 per unit of fixed overhead applied to part AA would be eliminated or avoided. What alternative is more desirable and by what amount it is more desirable? 1. Buy - P 50,000 2. Make - P50,000 3. Buy - P262,500 4. Make - P 262,500 O 1 O 2 O 3 O 4