Homework Help is Here – Start Your Trial Now!
Business
Accounting
Please help and break it down to understand.

Please help and break it down to understand.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Please help and break it down to understand.

SUP Problem A Oldman Inc. has been manufacturing its own lamp shades for its table lamps. The company is currently operating at 100% capacity. The direct materials cost is $5 per unit, the direct labour cost is $6 per unit and variable manufacturing costs are 40% of direct labour costs. Total fixed manufacturing costs are $500,000 per year. Normal production is 50,000 lampshades per year. A supplier offers to make the lampshades at a price of $20 per unit. If Oldman Inc. accepts the offer all variable manufacturing costs would be 100% avoidable and $200,000 of the total fixed manufacturing costs would be unavoidable. a) Prepare an incremental analysis for the decision to make or buy the lampshades. b) Should Oldman make or buy the lampshades? What is the $ advantage? c) Assume that if Oldman decides to buy the lampshades part of the factory space could be used to produce 10,000 other lighting products that would generate a contribution margin $15 per unit. Should Oldman make or buy the lampshades? Show your calculations. Problem B Hi-Tech is the creator of Y-Go, a technology that weaves silver into the fabric to kill bacteria and odou clothing while managing heat. Y-GO has become very popular in undergarments for sports activities. II <>
Transcribed Image Text:SUP Problem A Oldman Inc. has been manufacturing its own lamp shades for its table lamps. The company is currently operating at 100% capacity. The direct materials cost is $5 per unit, the direct labour cost is $6 per unit and variable manufacturing costs are 40% of direct labour costs. Total fixed manufacturing costs are $500,000 per year. Normal production is 50,000 lampshades per year. A supplier offers to make the lampshades at a price of $20 per unit. If Oldman Inc. accepts the offer all variable manufacturing costs would be 100% avoidable and $200,000 of the total fixed manufacturing costs would be unavoidable. a) Prepare an incremental analysis for the decision to make or buy the lampshades. b) Should Oldman make or buy the lampshades? What is the $ advantage? c) Assume that if Oldman decides to buy the lampshades part of the factory space could be used to produce 10,000 other lighting products that would generate a contribution margin $15 per unit. Should Oldman make or buy the lampshades? Show your calculations. Problem B Hi-Tech is the creator of Y-Go, a technology that weaves silver into the fabric to kill bacteria and odou clothing while managing heat. Y-GO has become very popular in undergarments for sports activities. II <>
Expert Solution
steps

Step by step

Solved in 3 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
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