Perez Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost ofproducing 9,300 containers follows.Unit-level materials$ 6,0006,9003,6008,40026,500Unit-level laborUnit-level overheadProduct-level costs*Allocated facility-level costs*One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Perez for $2.80 each.Requireda. Calculate the total relevant cost. Should Perez continue to make the containers?b. Perez could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculatethe total avoidable costs. Should Perez continue to make the containers?a. Total relevant costShould Perez continue to make the containers?b. Total avoidable costShould Perez continue to make the containers?< Prev6 of 7Next >

a. Total relevant cost = Unit-level materials + Unit-level labor + Unit-level overhead +…

Answered: Perez Electronics currently produces…

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

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 $5.50 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: Annual fixed costs Variable cost per switch Machine A $632,400 1.78 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 235,000 switches per year and what is the total cost of that alternative? Required 1 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Machine B $ 860,100 0.80 Minimum number of switches For each machine, what is the minimum number of switches that…
Ahrends Corporation makes 44,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials $ 23.80 Direct labor 27.70 Variable manufacturing overhead 8.70 Fixed manufacturing overhead 39.70 Unit product cost $ 99.90 An outside supplier has offered to sell the company all of these parts it needs for $86.20 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $286,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $34.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's…
Ahrends Corporation makes 46,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 14.30 23.90 3.00 28.30 $69.50 An outside supplier has offered to sell the company all of these parts it needs for $55.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $368,000 per year If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $24.90 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products What…
Waterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice O O $78,900 increase. $42,100 increase. $37,900 decrease. $ 129,000 20,500 60,000 80,000 $18,900 decrease.
Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $40 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost $ 8 Unit-level labor cost $ 7 Unit-level overhead $ 6 Batch-level set-up cost (4,000 units per batch) $ 30,000 Product-level supervisory salaries $ 40,000 Allocated facility-level costs $ 25,000 The company expects an annual need for 4,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $2,000 a month. If the company decides to make the parts, total costs will be: Multiple Choice a.$18,000 more than if the switches are purchased. b.$43,000 more than if the switches are purchased. c.$22,000 less than if the switches are purchased. d.$25,000 less than if the switches are purchased.
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 $5.20 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 $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?
Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* $ 5,200 6,500 3,600 9,300 26,600 Allocated facility-level costs *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?
Value Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 32,000 parts is $90,000, which includes fixed costs of $30,000 and variable costs of $60,000. The company can buy this part from an external supplier for $5 per unit and avoid 10% of the fixed costs. If Value Electronics decides to outsource the production of the part, how will it impact its operating income? A. Operating income increases by $97,000. B. Operating income decreases by $100,000. C. Operating income decreases by $97,000. D. Operating income increases by $100,000.
Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8,700 units per year for $10.00 each. Mohave the following information about the cost of producing tote bags: Direct materials $ 6.00 Direct labor 2.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 1.50 Total cost per unit $ 10.50 Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1) Based on the incremental analysis, should Mohave buy the tote bags or continue making them? 2) Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000 in annual profits. Recompute the difference in cost…
Ahrends Corporation makes 43,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 12.80 23.30 2.10 26.50 $ 64.70 An outside supplier has offered to sell the company all of these parts it needs for $51.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $301,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $23.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…
Thornton Electronics currently produces the shipping containers It uses to deliver the electronics products It sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,400 3,300 9,900 28,000 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Thornton for $2.60 each. Required a. Calculate the total relevant cost. Should Thornton continue to make the containers? b. Thornton could lease the space it currently uses in the manufacturing process. If leasing would produce $12,100 per month, calculate the total avoidable costs. Should Thornton continue to make the containers? a. Total relevant cost a. Should Thornton continue to make the containers? b. Total avoidable cost b. Should Thornton continue to make the containers?

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS