Lakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include directmaterials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that acertain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor andvariable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity.Required:a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a costof $5.20 per unit?Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places.b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit?a.b. Should Lakeside outsource conversion process at this cost?

OutsourcingOutsourcing is a common practice of contracting out the business functions/ processes to…

Answered: Lakeside Incorporated produces a…

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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Cox Electric makes electronic components and has estimated the following for a new design of one of its products. Fixed cost = $12,350 • Material cost per unit = $0.16 •Labor cost per unit = $0.12 •Revenue per unit = $0.66 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue. Construct an appropriate spreadsheet model to find the profit based on a given production level and use the spreadsheet model to answer these questions. (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = the total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000.…
Two separate processes are being considered for manufacturing a product. Process A has fixed costs of $12,000 and variable costs of $6 per unit. Process B has fixed costs of $16,000 and variable costs of $4 per unit. a. What is the break-even quantity for the two processes (Show your work)? b. Which process would be more cost-effective for producing 1,000 units? c. Which process would be more cost-effective for producing 3,000 units?
A company makes 36,000 motors to be used in the production of its blender. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the blender. The price offered to the company for this motor is $23.95. There would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice O O O ($68,400) $214,200 $9.50 $ 8.50 $ 3.45 $ 4.40 90,000 $158,400
Zycon has produced 10,000 units of partially finished Product A. These units cost $15,000 to produce, and they can be sold to another manufacturer for $20,000. Instead, Zycon can process the units further and produce finished Products X, Y, and Z. Processing further will cost an additional $22,000 and will yield total revenues of $35,000. Place an X in the appropriate column to identify whether the item is relevant or irrelevant to the sell or process further decision.
o Company has traditionally manufactured a number of different standard machine parts. It is now exploring an outsourcing decision r several of the parts that it currently produces. Cost information for one such machine part is given below: Variable cost/unit Fixed manufacturing costs (total) Allocated corporate overhead Unit product cost (based on 500 units) $ 31.50 5,440.00 6,760.00 $ 55.90 fty percent of the fixed manufacturing costs are directly traceable to this specific machine part and therefore avoidable. An outside upplier will sell the part at a price of $44 per unit if 500 units are purchased. equired: repare an analysis whether We Make should continue to manufacture this machine part or whether it should purchase it from the utside supplier. (Negative amounts should be indicated by a minus sign. Round "Per Unit" to 2 decimal places.) Purchase ariable cost ixed manufacturing overhead Common costs otal costs hould the company make or buy? O Make ○ Buy 500 Units Per Unit Make…
Cox Electric makes electronic components and has estimated the following for a new design of one of its products. . Fixed cost $27,000 Material cost per unit - $0.17 Labor cost per unit $0.11 Revenue per unit = $0.68 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue. Construct an appropriate spreadsheet model to find the profit based on a given production level and use the spreadsheet model to answer these questions, (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue the total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000. In which…
A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers. Revenue per unit will be $160 in either case. Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Near raw materials Near customers 1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minus sign.) 64 2. Which location would produce greater profit? O Near raw materials O Near customers Near Raw Materials $0.90 $ 40 8,600 Near Customers $1.00 $ 45 13,300
Cox Electric makes electronic components and has estimated the following for a new design of one of its products. Fixed cost = $23,750 • Material cost per unit = $0.17 • Labor cost per unit = $0.11 • Revenue per unit = $0.66 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue. Construct an appropriate spreadsheet model to find the profit based on a given production level and use the spreadsheet model to answer these questions. (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = the total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000.…
Futura Company purchases 75,000 starters from a supplier at $11.10 per unit that it installs in farm tractors. Due to a reduction in output, the company now has enough idle capacity to produce the starters rather than buying them from the supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.20, as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 5.00 3.00 1.80 1.46 2.66 2.40 $ 12. 26 Total $ 135,000 $ 185,000 $ 30,000 If Futura decides to make the starters, a supervisor would be hired (at a salary of $135,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83.000 per period. Required: What is the financial advantage (disadvantage) of making the…

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