McGraw Company uses 7.750 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $135,750, computed as follows Direct materials: Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $ 23,250 41,000 An outside supplier has offered to provide Part X at a price of $19.10 per unit. If McGraw Company stops producing the part internally. one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost Outside purchase Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost 15,500 56,000 $ 135,750 Required: Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer. Make 고 Buy

McGraw Company uses 7.750 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $135,750, computed as follows Direct materials: Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $ 23,250 41,000 An outside supplier has offered to provide Part X at a price of $19.10 per unit. If McGraw Company stops producing the part internally. one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost Outside purchase Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost 15,500 56,000 $ 135,750 Required: Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer. Make 고 Buy

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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Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $18.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $9.00, not including fixed costs. If 32,786 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a Oa. $590,148 cost decrease Ob. $295,074 cost decrease Oc. $131,144 cost increase Od. $295,074 cost increase
W.T. Ginsburg Engine Company manufactures part ACT31107 used several of its engine models. Monthly production costs for 1,010 units are as follows: Direct materials Direct labor $46,000 11,500 Variable overhead costs 32,500 Fixed overhead costs 23,000 Total costs $113,000 is estimated that 10% of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier. W.T. Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $96.75 per unit. W.T. Ginsburg Engine Company purchases 1,010 ACT31107 parts from the outside supplier per month, then its monthly operating income will (Round any intermediary calculations and your final answer to the nearest cent.) OA increase by $21,518 OB decrease by $5.418 OC. increase by $5,418 OD. decrease by $21,518 O Time Remaining: 02:15:58 Next 老 ) %23 20 8. 9 ఉతం W Y U R. S4
Crane Manufacturing Company Inc. uses 640 units of Part # 4317 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $100 per part. If Crane chooses to purchase the part from the outside supplier, one third of it's the fixed manufacturing overhead will be eliminated. The company's standard unit cost of producing the part is listed below. Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total unit cost $32 30 29 33 Crane $124 Ignoring qualitative factors, should Crane continue to make the parts internally or purchase them from the outside supplier? ✓ continue to make the part.
Mavs Incorporated produces and sells 30,000 units of Product X each month in one of their segments. Each unit of Product X sells for 25 per unit and the related variable expenses amounts to 22 per unit. If the production of Product X is discontinued, the segment manufacturing the product will also be eliminated. If this segment is eliminated, fixed costs of 80,000 out of the 200,000 allocated to this segment will continue. If Product X is discontinued, the company’s overall net operating income would:
Every year Riverbed Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 5.00 Direct labor 11.00 Variable manufacturing overhead 6.00 Fixed manufacturing overhead 10.00 Total $32.00 Ivanhoe, Inc., has offered to sell 7,300 units of part 231 to Riverbed for $34 per unit. If Riverbed accepts Ivanhoe’s offer, its freed-up facilities could be used to earn $10,500 in contribution margin by manufacturing part 240. In addition, Riverbed would eliminate 40% of the fixed overhead applied to part 231.(a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make $enter a dollar amount Net relevant cost to buy $enter a dollar amount (b) Should Riverbed accept Ivanhoe’s offer?
Finch Modems has excess production capacity and is considering the possibility of making and selling paging equipment. The following estimates are based on a production and sales volume of 1,600 pagers. Unit-level manufacturing costs are expected to be $26. Sales commissions will be established at $1.60 per unit. The current facility- level costs, including depreciation on manufacturing equipment ($66,000), rent on the manufacturing facility ($56,000), depreciation on the administrative equipment ($13,800), and other fixed administrative expenses ($74,950), will not be affected by the production of the pagers. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (pagers) on the basis of the number of units of product made (i.e., 5,600 modems and 1,600 pagers). Required a. Determine the per-unit cost of making and selling 1,600 pagers. (Do not round intermediate calculations. Round your answer to 3 decimal places.)…
Every year Marigold Industries manufactures 6,100 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total (a) Total relevant cost to make $ $4.00 Net relevant cost to buy 10.00 Carla Vista, Inc., has offered to sell 6,100 units of part 231 to Marigold for $34 per unit. If Marigold accepts Carla Vista's offer, its freed-up facilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Marigold would eliminate 40% of the fixed overhead applied to part 231. $ 6.00 10.00 Calculate total relevant cost to make and net cost to buy. $30.00
Beta makes a component used in its engine. Monthly production costs for 1,000 component units are as follows: Direct materials $46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Total costs $115,000 It is estimated that 8% of the fixed overhead costs will no longer be incurred if the company purchases the component from an outside supplier. Beta has the option of purchasing the component from an outside supplier at $97.75 per unit. 22) If Beta accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total 23) If Beta purchases 1,000 units from the outside supplier per month, then what would be the change in operating income?
Penagos Corporation is presently making part Z43 that is used in one of its products. A total of 5,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials. Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead An outside supplier has offered to produce and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,000 of these allocated general overhead costs would be avoided. If management decides to buy part Z43 from the outside supplier rather than to…
Shine Engine Company manufacturers Part A which is used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials sh. 40,000 Direct labour 10,000 Variable overhead costs 30,000 Fixed overhead costs 20,000 Total costs 100,000 It is estimated that 10% of the fixed overhead costs assigned to Part A will no longer be incurred if the company purchases Part A from the outside supplier. The company has the option of purchasing the part from an outside supplier at sh. 85 per…
Roadside Inc. manufactures the Megalite, and is reviewing the product's cost structure. Accounting records show these costs:factory space: $250,000 per yearinsurance: $47,000 per yearsupervisor salaries: $125,000 per yearmaterials: $5.00 per lampdirect labor: $2.69 per lamprecycling charge: $0.37 per lampRoadside Inc sells the Megalite to wholesalers for $13.69 each. Calculate Roadside's contribution margin as percent of selling price on the Megalite. (Rounding: tenth of a percent. Report 25.3%, for example, as "25.3".)
Make or Buy Desert Industries manufactures 5,000 units of Part X300 each month for use in production. The facilities now being used to produce Part X300 have fixed monthly overhead costs of $75,000, and a theoretical capacity to produce 7,000 units per month. If Desert were to buy Part X300 from an outside supplier, the facilities would be idle and 80% of the fixed costs would continue to be incurred. There are no alternative uses for the production facilities. The variable production costs of Part X300 are $34 per unit. Fixed overhead is allocated based on planned production levels. If Desert Industries continues to use 5,000 units of Part X300 each month, it would realize a net benefit by purchasing Part X300 from an outside supplier only if the supplier's unit price is less than what amount? $0 Check