General Accounting Neptune Electronics incurs unit costs of $12 ($8 variable and $4 fixed) inmanufacturing a circuit board component for its main product. A supplier hasoffered to produce 25,000 of these components at $9.50 per unit. If the offer isaccepted, Neptune will avoid all variable costs but retain all fixed costs.Calculate the total cost impact (saving or increase) if Neptune accepts thesupplier's offer.A. $37,500 cost increaseB. $62,500 cost savingC. $37,500 cost savingD. $62,500 cost increase

Step 1: Define Make-or-Buy DecisionA make-or-buy decision analyzes whether a company should continue…

Answered: Neptune Electronics incurs unit costs…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 5P

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Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.80 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 141,450 $ 188,325 Variable cost per switch 0.57 0.25 Required: For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? What volume level would produce the same total costs regardless of the machine purchased? What is the most profitable alternative for producing 155,000 switches per year and what is the total cost of that alternative
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ok t M ences Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas's contract specifies that it will receive a flat fee of $68,000 and an additional $38,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target. Required: 1. Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price. 2. Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price. 3. Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price. 1. Using expected value 2. Using most likely value 3. Using expected value but uncertain Transaction Price
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