Meke-ar-Uuy Decison Diamonc Compe Compeny has been parchasing caryng cases for its portable computers at a purchase price of $59 per unit. The company, which is ourrently ooerating below hull capacity, charges factory overheed to productien at the rate of 40% of direct laber cost. The ully absorbed unit costs te produce comparable carrying cases are expected to be as folows: Drest materials $35.00 Dect lebor 18.00 ractery overheas (40% of direct labor) 7.20 Total cost per unit SG0.20 Lf Diamond Cemputer Company manufectures the carrying cases, fixcc tactory overhead cests will not intreese and varisble factory overhead costs associated with the cases are expeted to be 15% of the direct labor costs a. Presere a diterential analysis dated Fetnary 24 to determne whethe the compary should make (Atemative 1) or buy (Altermetive 2) the carrying case. ar an amount is zera, erter 0. f required, round your anSners o dec mai places. for those boxes in which yeu must enter subtracted or negative murnbers use aminus sign. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (AIt. 2) February 24 Differential Errect Buy Carrying Case (Alternative 1) Case (Alternative 2) Make Carrying on Costs (Alternative 2) Sales Price Cass Puchese prike Direct mstersls per unit Direct labor per unit Variable actory ovehead per unit Fixed tactory evenead per unt

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Make-ar-Buy Decision
Diamond Cormpure Company has teen purchasing carry ing cases for its portable computers at a purchase price of $55 per unit. The company, which is currently operating below full capacity, charges factory uverhead to
production at the rate of 40% of direct laber cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:
Drect materials
$35.00
Direct labur
18.00
l'actory overhead (405 of direct labor)
7.20
Total cost per urit
$60.20
LF Diamond Computer Company manufactures the carrying cases, fixcd factory overhead cests will not intrease and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.
a. Prepare a differential analysis dated Febniary 24 to deterinine whether the company should make (Atermative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter 0". 1f required, round your answers to
decimal places. For those bexes in wvhich you must enter subtracted or neoative numbers use a minus sign.
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (AIL. 2)
February 24
Ditferential Erfect
Make Carrying
Case (Alternative 1) Case (Alternative 2)
Buy Carrying
on Costs
(Alternative 2)
Sales Price
Casts:
Purchese price
Direct materials per unit
Direct labor per urit
Variable factory overhead per urit
Fixed factory overnead per unit
Income (Less)
Transcribed Image Text:Make-ar-Buy Decision Diamond Cormpure Company has teen purchasing carry ing cases for its portable computers at a purchase price of $55 per unit. The company, which is currently operating below full capacity, charges factory uverhead to production at the rate of 40% of direct laber cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Drect materials $35.00 Direct labur 18.00 l'actory overhead (405 of direct labor) 7.20 Total cost per urit $60.20 LF Diamond Computer Company manufactures the carrying cases, fixcd factory overhead cests will not intrease and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs. a. Prepare a differential analysis dated Febniary 24 to deterinine whether the company should make (Atermative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter 0". 1f required, round your answers to decimal places. For those bexes in wvhich you must enter subtracted or neoative numbers use a minus sign. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (AIL. 2) February 24 Ditferential Erfect Make Carrying Case (Alternative 1) Case (Alternative 2) Buy Carrying on Costs (Alternative 2) Sales Price Casts: Purchese price Direct materials per unit Direct labor per urit Variable factory overhead per urit Fixed factory overnead per unit Income (Less)
Sell or Process Further
Rise N' Shine Coffee Company produces Columblan caffee in batches of 6,000 pounds. The standard qUantity of materials required in the process is 6,000 pounds, which cost $5.50 per pound. Columbian coffee can be sold withaut
further processing for $9.22 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.88 per pound. The processing inta Decaf Columblan requires additional processing costs
of $10,230 per batch. The additional processing also causes a 5% loss of product due to evaparation.
a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negatiive
numbers use a minus sign.
Differential Analysis
Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2)
October 6
Process
Differential
Effect
Sell
Further Into
Regular
Decaf
Columbian
on Income
Columbian
(Alternative 1)
(Alternative 2)
(Alternative 2)
Revenues
-13,000
Costs
Income (Loss)
b. Should Rise N' Shine sell Columbian coffee or process further and sell Decaf Columbian?
Process into Decaf Columbian v
c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columblan. Round your answer to two decimal places.
per pound
Transcribed Image Text:Sell or Process Further Rise N' Shine Coffee Company produces Columblan caffee in batches of 6,000 pounds. The standard qUantity of materials required in the process is 6,000 pounds, which cost $5.50 per pound. Columbian coffee can be sold withaut further processing for $9.22 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.88 per pound. The processing inta Decaf Columblan requires additional processing costs of $10,230 per batch. The additional processing also causes a 5% loss of product due to evaparation. a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negatiive numbers use a minus sign. Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) October 6 Process Differential Effect Sell Further Into Regular Decaf Columbian on Income Columbian (Alternative 1) (Alternative 2) (Alternative 2) Revenues -13,000 Costs Income (Loss) b. Should Rise N' Shine sell Columbian coffee or process further and sell Decaf Columbian? Process into Decaf Columbian v c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columblan. Round your answer to two decimal places. per pound
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