What is the highest price that another company? KHP Manufacturing produces a part that is used in the assemblyof one of its products. The costs associated with producing15,000 units of this part are as follows:Cost ComponentDirect materialsDirect laborAmount (euro)112,000180,000Variable factory overhead 90,000Fixed factory overhead 140,000Total costs522,000Of the fixed factory overhead costs, 84,000 euros is avoidable.Assuming no alternative use of the facilities, what is the highestprice that another company (e.g., Delta Components) should bewilling to pay externally for 15,000 units of this part?

Step 1: DefinitionsConcept of Relevant Cost:Relevant Cost is a cost that is directly affected by a…

Answered: KHP Manufacturing produces a part that…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...

See similar textbooks

Similar questions

Need help
Answer this below Question
I want Solution
Crane Company has decided to introduce a new product that can be manufactured by either a capital-intensive method or a labour-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs under the two methods are as follows: Direct materials Direct labour Variable overhead Fixed manufacturing costs Capital-Intensive $10.00 per unit $12.00 per unit $6.00 per unit $2,624,960 Labour-Intensive $11.00 per unit $16.00 per unit $9.00 per unit $1,612,000 Crane's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are estimated to be $522,080 annually, plus $4 for each unit sold, regardless of the manufacturing method.
Piels Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Direct materials $87,000 Direct labor: $126,000 Variable factory overhead: $58,000 Fixed factory overhead: $136,000 Total costs: $407,000 Of the fixed factory overhead costs, $55,000 is avoidable Assuming no other use of their facilities, the highest price that Piels should be willing to pay for 10,000 units of the part is ?
Pharoah Company manufactured 6,720 units of a component part that is used in its product and incurred the following costs: Direct materials $39,200 Direct labor 16,800 Variable manufacturing overhead 11,200 Fixed manufacturing overhead 22,400 $89,600 Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Pharoah Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $24,640.Prepare an incremental analysis report for Pharoah Company which can serve as informational input into this make or buy decision.
Z Inc. manufactures a component Zeta which it uses in production of its main product. The manufacturing costs per unit of Zeta are as follows: Item Cost per unit Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead 3.50 4.50 2.50 2.00 Annual requirement of Zeta is 8,000 units. Fixed manufacturing overhead is allocated to Zeta based on machine-hours used in its production and cannot be avoided if production of Zeta is stopped. An outside supplier has offered Z Inc. to supply 8,000 units at a total cost of $96,000. If Z Inc. purchases the component Zeta from the outside supplier, how will it affect its operating income? a. Operating income will increase by $4,000 b. Operating income will decrease by $4,000 c. Operating income will increase by $6,000 d. Operating income will decrease by $12,000
Ragemark Company produces 15,000 units of a component used in freezer. An outside supplier has offered to supply the part for $1.42. The unit cost is: Direct material $0.55 Direct labour 0.2 Variable overhead 0.1 Fixed overhead 2.45 Total unit cost $3.30 Required: 1. What are the alternatives for Ragemark Company? 2. Assume that none of the ﬁxed cost is avoidable. List the relevant cost(s) of internal production and of external purchase. 3. Which alternative is more cost effective and by how much?
What is the amount of avoidable costs?
The Grouper Company manufactures 1,478 units of a part that could be purchased from an outside supplier for $14 each. Grouper’s costs to manufacture each part are as follows: Direct materials $2 Direct labor 4 Variable manufacturing overhead 3 Fixed manufacturing overhead 8 Total $17 All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (a) Calculate relevant cost to make. Relevent cost to make $ ___ per unit (c) Calculate net cost to buy if Grouper leases the manufacturing facilities to another company for $9,260 per year. Net cost to buy $ ______
What is the fixed overhead costs of making the component
Carla Vista Company has decided to introduce a new product that can be manufactured by either a capital-intensive method or a labour-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs under the two methods are as follows: Capital-Intensive Labour-Intensive Direct materials $5.50 per unit $10.75 per unit Direct labour $4.00 per unit $9.00 per unit Variable overhead $3.50 per unit Fixed manufacturing costs $2,423,040 $7.25 per unit $1,488,000 Carla Vista's market research department has recommended an introductory unit sales price of $32. The incremental selling expenses are estimated to be $481,920 annually, plus $2 for each unit sold, regardless of the manufacturing method. (a) Your Answer Correct Answer (Used) Your answer is partially correct. Calculate the estimated break-even point in annual unit sales of the new product if Carla Vista Company uses (1) the capital- intensive manufacturing method, or (2) the…

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

SEE MORE TEXTBOOKS