Piper Recreational Vehicles (PRV) modifies vans into recreational vehicles. PRV offers two models, the XC-2 and XC-6, which differ in the quality of the basic van and the workmanship and machining detail that are used. The following data reflect expected operations for the next year. Number assembled Materials cost per RV other costs: Direct labor Depreciation Miscellaneous costs Operation cost Materials cost Total cost Unit cost XC-2 XC-2 54 $ 40,000 XC-6 39 $ 70,000 Required: Piper Recreational Vehicles uses operations costing and assigns conversion costs based on the number of urlits assembled. Compute the expected cost of each model assembled next year. XC-6 Total 93 $ 905,550 735, 120 633,180 Total

Piper Recreational Vehicles (PRV) modifies vans into recreational vehicles. PRV offers two models, the XC-2 and XC-6, which differ in the quality of the basic van and the workmanship and machining detail that are used. The following data reflect expected operations for the next year. Number assembled Materials cost per RV other costs: Direct labor Depreciation Miscellaneous costs Operation cost Materials cost Total cost Unit cost XC-2 XC-2 54 $ 40,000 XC-6 39 $ 70,000 Required: Piper Recreational Vehicles uses operations costing and assigns conversion costs based on the number of urlits assembled. Compute the expected cost of each model assembled next year. XC-6 Total 93 $ 905,550 735, 120 633,180 Total

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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U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $291 each. Current production information follows: Unit-level material and labor $240 Facility-level depreciation of manufacturing equipment Product-level engine production supervisor's salary $6,300 /month $3,300 /month $21,500 Annual facility-level utilities U-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice O O U-RIDE should make the engines for cost savings of $51 per unit. Buying the units would increase U-RIDE's cost by $39 per unit. U-RIDE has avoidable costs of greater than $291 per unit and should therefore buy the engines. Buying the units would increase profitability by $90 per unit.
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Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Basu Company produces 22,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.26. The unit cost is: Direct materials $0.77 Direct labor 0.29 Variable overhead 0.09 Fixed overhead 2.10 Total unit cost $3.25 Required: 1. What are the alternatives for Basu Company? 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. List the relevant cost(s) of external purchase. 3. Which alternative is more cost effective and by how much? ____ by 4. What if $19,240 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much? ____ by
Assume that a company manufactures numerous component parts, one of which is called Part A. The company's absorption costing system indicates that it costs $23.00 to make one unit of Part A as shown below: Direct materials $ 10.00 Direct labor 6.00 Variable overhead 2.00 Fixed overhead 5.00 Total absorption cost per unit $ 23.00 The company is trying to decide between two alternatives: Alternative 1: Continue making 80,000 units of Part A per year using its existing equipment at the unit cost shown above. The equipment used to make this part does not wear out through use and it has no resale value. Alternative 2: Replace the existing equipment with a new piece of equipment that the company would rent for $150,000 per year. The new piece of equipment would be used to make 80,000 units per year and it would reduce Part A's direct labor cost per unit by 20% and its variable overhead per unit by 30%. The direct materials cost per unit will remain constant. What is the financial advantage…
Piper Recreational Vehicles (PRV) modifies vans into recreational vehicles. PRV offers two models, the XC-2 and XC-6, which differ in the quality of the basic van and the workmanship and machining detail that are used. The following data reflect expected operations for the next year. Number assembled Materials cost per RV Other costs: Direct labor Depreciation Miscellaneous costs XC-2 54 $ 40,000 XC-6 Operation cost Materials cost Total cost Unit cost 39 $ 70,000 Total 93 $ 905,550 735, 120 633, 180 Required: Piper Recreational Vehicles uses operations costing and assigns conversion costs based on the number of units assembled. Compute the expected cost of each model assembled next year. X Answer is complete but not entirely correct. XC-2 XC-6 $ 1,320,408X $ 2,160,000 $ 3,480,408X $ 3,683,428X $ 64,452 X $ 94,448 X Total 953,428X $ 2,273,836 2,730,000
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