Q.1. An item sells for $25 a unit, but a 10% discount is offered for lots of 150 units or more. Acompany uses this item at the rate of 20 units per day. The setup cost for ordering a lot is $50, andthe holding cost per unit per day is $.30. The lead time is 12 days. The same item can also beproduced in house with its setup cost being $30 and production cost per unit being $20. Shouldthe company purchase the item or produce it in-house?

Economic Order Quantity is the number of units to be ordered in a particular order to make the…

Answered: produced in house with its setup cost…

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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The following standard costs pertain to a component part manufactured by Ashby Company:Direct materials$2Direct labour5Manufacturing overhead 20 Standard cost per unit $27The company can purchase the part from an outside supplier for $25 per unit. The manufacturing overhead is 60% fixed and this fixed portion would not be affected by this decision. Assume that direct labour is an avoidable cost in this decision. What is the relevant amount of the standard cost per unit to be considered in a decision of whether to make the part internally or buy it from the external supplier?
16. In its production of shirts, a company incurs the following costs: $15,000 for production workers, $8,000 for fabric, $3,500 for electricity in production facilities, and $300 for buttons. Calculate the following: a. Prime costs b. Conversion costs
question? 1) For each cost determine whether it is fixed,variable or mixed? Think about the appropriate activity level for each cost:units sold or units produced. 2) prepare a properly formatted cost function for each cost ?
Required : i) List the alternatives facing Zee Manufacturing with respect to production of component S6 . ii) List the relevant costs for each alternative if Zee decides to purchase the component from Bryan . Predict whether the operating income will increase or decrease and better alternatives . b) Refer to the information for Zee Manufacturing above . Assume that 75 % of Zee Manufacturing's fixed overhead for component S6 would be eliminated if that component were no longer produced . Required : If Zee decides to purchase the component from Bryan , predict whether the operating income will increase or decrease and propose the better alternatives .
The AB division sells goods internally to the CD division of the same company. The quoted external price in industry publications from a supplier near AB is P200 per ton plus transportation. It costs P20 per ton to transport the goods to CD. AB’s actual market cost per ton to buy the direct materials to make the transferred product is P100. Actual per ton direct labor is P50. Other actual costs of storage and handling are P40. The company president selects a P220 transfer price. This is an example of: Cost-based transfer pricing. Cost plus 20% transfer pricing. Market-based transfer pricing. Negotiated transfer pricing.
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a company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which is NOT relevant to the decision? a- the costs incurred to process the units to this point b- the selling price of the partially completed units c- the costs that will be incurred to finish the units d- the costs that will be incurred to finisht the units
The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Payment
Lamont Company produced 80,000 machine parts for diesel engines. There were no beginning or ending work-in-process inventories in any department. Lamont incurred the following costs for May: Direct materials Direct labor Applied overhead Molding Department $12,000 10,000 17,000 Grinding Department $5,300 8,800 14,000 Finishing Department $8,000 12,000 12,000
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Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation.

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produced in house with its setup cost being $30 and production cost per unit being $20. Should the company purchase the item or produce it in-house?