1. Lease the needed space and equipment at a cost of $29,430 per quarter for the space and $10,900 per quarter for a supervisor. There are no other fixed expenses2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixedexpenses, including supervision, would be $41,420, $8,720 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge winot be affected.Required:1. Should Morrll Company make or buy the subassembly?Make the subassemblyIf it makes the subassembly, which alternative should be chosen?Drop the thickness gaugeEnter the relevant costs of each alternative.Lease and MakeBuyDrop Thickness Gauge and MakeTotal relevant costs55,59054,50047,960 x2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What decision should now be made?Keep the thickness gauge and buy the subassembly3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 3,052 subassemblies are required per quarter. As before,assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are thesame as in RequirementInclude the leasing alternative in your considerion. Now, what is the correct decision?Lease the space and make the subassembly Make-or-Buy, Traditional AnalysisMorrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows.DensityThicknessGaugeGaugeTotalSales$ 163,500$ 87,200$ 250,700Less variable expenses87,20050,140137,340Contribution margin$ 76,300$ 37,060$ 113,360Less direct fixed expenses*21,80041,42063,220Segment margin$ 54,500$ (4,360)$ 50,140Less common fixed expenses32,700Operating income$ 17,440* Includes depreciation.The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,180 subassemblies are purchased. All units producedare sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturingcosts are as follows:Direct materials$2Direct labor3Variable overhead

What is meant by Make or Buy Decision making? It is the process of deciding whether to inhouse…

Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Density Thickness Gauge Gauge Total Sales $ 163,500 $ 87,200 $ 250,700 Less variable expenses 87,200 50,140 137,340 Contribution margin $ 76,300 $ 37,060 $ 113,360 Less direct fixed expenses* 21,800 41,420 63,220 Segment margin $ 54,500 $ (4,360) $ 50,140 Less common fixed expenses 32,700 Operating income $ 17,440 * Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,180 subassemblies are purchased. All units produc are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: Direct materials $2 Direct labor

Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Density Thickness Gauge Gauge Total Sales $ 163,500 $ 87,200 $ 250,700 Less variable expenses 87,200 50,140 137,340 Contribution margin $ 76,300 $ 37,060 $ 113,360 Less direct fixed expenses* 21,800 41,420 63,220 Segment margin $ 54,500 $ (4,360) $ 50,140 Less common fixed expenses 32,700 Operating income $ 17,440 * Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,180 subassemblies are purchased. All units produc are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: Direct materials $2 Direct labor

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Copr. Goedl Uplift, Inc. has two divisional units-Bha and Cha. Total fixed expenses fro the organization are $96,000. Data for the units is presented below: Sales Variable expenses Traceable fixed expenses $45,000 Bha $30,000 $100,000 $70,000 $24,000 Cha $90,000 $45,000 Compute the segment breakeven in sales dollars for Bha. $82,000 $70,000 $41,000 $80,000 SUBMIT
The following data are for Greasy Gary's Grubhouse: West East Sales volume (units): Hub Cap 14,000 9,000 Gas Can 6,500 18,000 Sales price per unit: Hub Cap $36 $28 Gas Can $22 $31 The variable cost of goods sold per unit Hub Cap $19 $17 Gas Can $9 $14 Variable selling and administrative per unit Hub Cap $ 5 $ 4 Gas Can $ 3 $2 (a) Complete a contribution margin by sales territory and by-product (b) Analyze the statements and comment on what can help the company in terms of profitability, product placement, and territory. List 3 pros and cons to each product and territory.
Contribution Margin Sally Company sells 36,000 units at $11 per unit. Variable costs are $7.70 per unit, and fixed costs are $44,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio (Enter as a whole number.) % b. Unit contribution margin (Round to the nearest cent.) per unit c. Income from operations
Contribution margin Amon Company sells 180,000 units at $185 per unit. Variable costs are $111 per unit, and fixed costs are $8,175,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) operating income. a. Contribution margin ratio b. Unit contribution margin $ c. Operating income LA % per unit
Vala
N1. Account
s
Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (11,300 units at $175 each) Variable costs (11,300 units at $140 each) Contribution margin Fixed costs Income 1. Compute break-even point in units. 2. Compute break-even point in sales dollars. 1. Break-even units 2. Break-even sales dollars units $ 1,977,500 1,582,000 395,500 315,000 $ 80,500
Required information Skip to question [The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 25, 700 Variable expenses 13,900 Contribution margin 11, 800 Fixed expenses 7, 788 Operating income $ 4,012 7. If the variable cost per unit increases by $0.60, spending on advertising increases by $1,100, and unit sales increase by 250 units, what would be the operating income? (Do not round intermediate calculations.)
pls help
The following information is available from the accounting records of Wisconsin International Inc.. Sales at 65% of Capacity $89,500 Fixed costs $36,950 Variable costs $28,350 Total costs $65,300 Net Income $24,200 a) Compute the break-even point in sales dollars (round off two the nearest cent) $ b) Compute the break-even point as a percent of capacity. (round off two decimal places) %
Whirly Corporation's contribution format income statement for the most recent month is shown below: Per Unit $ 32.00 19.00 $13.00 Sales (8,300 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 265,600 157,700 Required: (Consider each case independently): 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income 8 $ 107,900 55,200 $ 52,700 1. What would be the revised net operating income per month if the sales volume increases by 80 units? 2. What would be the revised net operating income per month if the sales volume decreases by 80 units? 3. What would be the revised net operating income per month if the sales volume is 7,300 units?