Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost ofproducing 9,100 containers follows.Unit-level materialsUnit-level laborUnit-level overheadProduct-level costsAllocated facility-level costs$ 5,7006,8003,9008,10027,200One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each.Requireda. Calculate the total relevant cost. Should Jordan continue to make the containers?b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculatethe total avoidable costs. Should Jordan continue to make the containers?a. Total relevant costShould Jordan continue to make the containers?b. Total avoidable costShould Jordan continue to make the containers?

A make-or-buy choice is made while deciding whether to manufacture a product internally or to buy it…

Answered: Jordan Electronics currently produces…

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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Similar questions

Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is 249,000 units. The facility has a practical capacity of 264,000 units annually. The company leased the current facility because facilities capable of manufacturing the unit require machines that can produce 66,000 units each. The annual cost of the facility is $1,013,760. The variable cost of a part is $4. Required: a. What cost per unit should the cost system report to facilitate management decision making? Note: Round your answer to 2 decimal places. b. What is the cost of excess capacity? a. Cost per unit b. Cost of excess capacity
Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit. Required: a) Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain.b) An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations.c) How do your answers in parts (a) and (b) relate to the theory of constraints?…
Finch Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,400 6,000 4,000 11,400 27,300 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Finch for $2.70 each. Required a. Calculate the total relevant cost. Should Finch continue to make the containers? b. Finch could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Finch continue to make the containers? a. Total relevant cost Should Finch continue to make the containers? b. Total avoidable cost Should Finch continue to make the containers?
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.80 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 141,450 $ 188,325 Variable cost per switch 0.57 0.25 Required: For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? What volume level would produce the same total costs regardless of the machine purchased? What is the most profitable alternative for producing 155,000 switches per year and what is the total cost of that alternative
The Mighty Music Company produces and sells a desktop speaker for $200. The company has the capacity to produce 60,000 speakers each period. At capacity, the costs assigned to each unit are as follows: Unit-level costs Product-level costs Facility-level costs The company has received a special order for 11,000 speakers. If this order is accepted, the company will have to spend $20,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? Multiple Choice O O $96.82 $146.82 $104.32 $95 $25 $15 $107.32
Thornton Industries has 2,700 defective units of product that already cost $28 each to produce. A salvage company will purchase the defective units as is for $12 each. Thornton's production manager reports that the defects can be corrected for $20 per unit, enabling them to be sold at their regular market price of $28. The $28 per unit is a: Multiple Choice Sunk cost. Opportunity cost. Out-of-pocket cost. Period cost. Incremental cost.
Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows. Direct materials $30,000 Variable overhead $45,000 Direct labor $42,000 Fixed overhead $60,000 Instead of making the switches at an average cost of $2.95 ($177,000 ÷ 60,000), the company has an opportunity to buy the switches at $2.7 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net IncomeIncrease (Decrease) Direct materials $ $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total…
Barkov Industries makes an electronic component in two departments, Machining and Assembly. The capacity per month is 60,000 units in the Machining Department and 50,000 units in the Assembly Department. The only variable cost of the product is direct material of $200 per unit. All direct material cost is incurred in the Machining Department. All other costs of operating the two departments are fixed costs. Barkov can sell as many units of this electronic component as it produces at a selling price of $500 per unit. Required: Barkov’s Machining managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $100,000. Should the money be spent? Explain. An outside contractor offers to do assembly for 10,000 units at a cost of $2,000,000. Should Barkov accept the offer from the subcontractor? Show calculations. How do your answers in parts (a) and (b) relate to the theory of constraints? Explain.
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 30,000 parts is $100,000, which includes fixed costs of $40,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income? A. decrease of $8,000 B. decrease of $24,000 C. increase of $16,000 D. increase of $24,000
Carver Company manufactures a component used in the production of one of its main products. The following cost information is available: Direct materials $420 Direct labor (variable) 110 Variable manufacturing overhead Fixed manufacturing overhead 90 30 A supplier has offered to sell the component to Carver for $650 per unit. If Carver buys the component from the supplier, the released facilities can be used to manufacture a product that would generate a contribution margin of $20,000 annually. Assuming that Carver needs 3,000 components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources? A. Operating income would decrease by $70,000. B. Operating income would increase by $20,000. C. Operating income would decrease by $20,000. O D. Operating income would increase by $90,000.
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Adams for $2.80 each.Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $5,900 6,200 3,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.60 each. Required X Answer is complete but not entirely correct. $ 19,300 Yes $ 24,180 X No 11,100 26,900 a. Calculate the total relevant cost. Should Adams continue to make the containers? b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,800 per month, calculate the total avoidable costs. Should Adams continue to make the containers? a. Total relevant cost a. Should Adams continue to make the containers? b. Total avoidable cost b. Should Adams continue to make the containers?

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