Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making itsown boards. The costs to make the board are as follows: direct materials, $33 per unit; direct labor, $12 per unit; and variable factory overhead, $15 perunit. Fixed costs for the plant would increase by $90,000. Which option should be selected and why?Oa.a. buy, $90,000 increase in profitsOb. make, $80,940 increase in profitsc. make, $171,000 increase in profitsOd. buy, $80,940 increase in profits

Total Relevant Cost :— It is the cost that is different in different alternatives. It is considered…

Answered: Mighty Safe Fire Alarm is currently…

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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Holiday Corporation has two divisions, Quail and Marlin. Quail produces a widget that Marlin could use in its production. Quail's variable costs are $4.30 per widget while the full cost is $7.30. Widgets sell on the open market for $12.60 each. If Quail has excess capacity, what would be the minimum transfer price if Marlin currently is purchasing 115,000 units on the open market? Multiple Choice $5.30 $4.30 $12.60 $7.30
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?
Paradise Manufacturing currently makes one of its parts for a total cost of $3.80 per unit. This cost is based on a normal capacity of 60,000 units. Variable cost are $2.50 per unit. Fixed cost related to making this part is $30,000. Allocated fixed cost are unavoidable and amount to $30,000. Paradise Manufacturing is considering buying the part for $2.80 per unit. Should the company continue making the part or should they buy the part from the outside supplier? Give a numerical justification for your answer.
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…
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Answer the following questions. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.) Make Buy Relevant costs: Unit relevant cost Douglas…
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Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it internally. The supplier will charge $20,000 for 20,000 pounds of the product. The costs per pound to make this product include: Cost per Pound $0.30 Direct Labor Direct Materials $0.60 $0.70 Allocated Unavoidable Overhead If Daily Kneads outsources, what is the savings (or loss) per pound for the company as a whole? If the amount is a loss include a negative sign (not parentheses) in your answer. "_"
Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why? a.make, $244,000 increase in profits b.buy, $164,090 more in profits c.buy, $80,000 more in profits d.make, $164,090 increase in profits
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A distributor of fasteners is opening a new plant and considering whether to use a mechanized process or a manual process to package the product. The manual process will have a fixed cost of $36,234 and a variable cost of $2.14 per bag. The mechanized process would have a fixed cost of $84,420 and a variable cost of $1.85 per bag. The company expects to sell each bag of fasteners for $2.75. a) What is the break-even point for the manual process (in units)? b) What is the break-even point for the mechanized process (in units)? c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: 1) Use equations to set profit of manual process equal to mechanized process and solve for quantity; 2) (Excel) If you have a break-even for each process - have only one cell that represents quantity that be used to calculates costs/revenues for each process and use Goal…

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