Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 7,400 bikes each year. Due to the low volume of activity,Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebarsfor $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs.ItemUnit-level costsMaterialsLaborOverheadAllocated facility-level costsTotalUnit Cost$17829$36Per UnitTotal relevant costDo you agree with the president's conclusion?After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce thehandlebars at $36 each when it can buy them for $33 each.Total$125,80059,20014,80066,600$266,400RequiredCalculate the total relevant cost. Do you agree with the president's conclusion?Total

Relevant costs are those cost that differ between alternative courses of action and have the…

Answered: Jordan Bicycle Manufacturing Company…

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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Outsourcing Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 30% of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit $ Direct materials 119.00 26.00 per unit Direct labor per unit 18.00 Variable manufacturing overhead per unit 14.00 Fixed manufacturing overhead (MOH): per month 30.00 Avoidable fixed MOH per month Unavoidable fixed MOH per month Sales commissions per unit 3.00 Advertising costs per month per unit Purchase price of outsourced product Shipping costs of outsourced product 1.80 59.00 1.00 per unit Costs per unit Incremental analysis Manufacture Variable costs Enter "=0" in the cell for any cost not relevant to the decision. Direct materials…
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Racer X Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled: Direct Labor-Hours per unit Annual Production Deluxe 0.4 20,000 units Standard 0.2 80,000 units Additional information follows: a. Deluxe models require $17 in DM per unit and Standard models require $10. b. The DL wage rate is $16 per hour. c. Deluxe models are more complex to manufacture than Standard models, and they require special equipment. d. The ABC system has the following activity cost pools: Activity Cost pool Activity Measure Estimated Activity Overhead Deluxe Standard Total Cost Machine setups Special processing General factory Number of setups $21,600 $180,000 $288,000 100 80 180 Machine-hours 4,000 4,000 DL-hrs 8,000 16,000 24,000 Required: 1- Compute the activity rate for each activity cost pool 2- Compute the unit cost of each product according to the ABC system
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Sardi Incorporated is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 12,600 of the components each year. The unit product cost of the component according to the company's cost accounting system is given as follows: Direct materials $ 8.40 Direct labor 5.40 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 3.20 Unit product cost $ 18.20 Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 35% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 1 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 2 minutes on this machine and that has a contribution margin of $4.80 per unit. When deciding whether to make or buy the component, what cost of making the component should be compared to the price of buying the…
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Facts and circumstances: A company produces three different products on several identical machines. The annual capacity is restricted to 12,000 machine hours. The controller has prepared the following overview. Please help her to find out the product mix with the maximum contribution possible using the form below: Required: Which quantities of X, Y and Z should be produced and what would be the maximum contribution? Components Sales price Variable costs Allocated fixed costs Total cost Machine hours per unit Estimated sales demand (units) X 90 40 30 70 3 2,50 0 Y Z Control 80 70 20 40 30 30 50 70 2.5 1,00 0 2 2,50 0
! Required information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $205 and $164, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 127,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 40 37 24 32 29 32 $194 Beta $ 24 30 Total contribution margin 22 35 25 27 $163 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 14. Assume that Cane's customers would buy a maximum of 97,000 units of Alpha and 77,000 units of Beta. Also assume that the…
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Which assets depreciate?
Tool Time manufactures carpenter-grade screwdrivers. The company is trying to decide whether to continue to make the case in which the screwdrivers are sold, or to outsource the case to another company. The direct material and direct labor cost to produce the cases total $2.40 per case. The overhead cost is $1.00 per case which consists of $0.40 in variable overhead that would be eliminated if the cases are bought from the outside supplier. The $0.60 of fixed overhead is based on expected production of 400,000 cases per year and consists of the salary of the case production manager of $80,000 per year, along with the remainder consisting of rent, insurance, and depreciation on equipment that will have no resale value. The manager will be laid off if the cases were bought externally. The outside supplier has offered to supply the cases for $3.40 each. How much will Tool Time save or lose if the cases are bought externally? Save $0.40 per case Lose $0.20 per case…

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