Crane Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at100% of capacity, and variable manufacturing overhead is charged to production at the rate of 56% of direct labor cost.The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normalproduction is 31,100 curtain rods per year.A supplier offers to make a pair of finials at a price of $13.30 per unit. If Crane Ranch accepts the supplier's offer, allvariable manufacturing costs will be eliminated, but the $47,500 of fixed manufacturing overhead currently beingcharged to the finials will have to be absorbed by other products.(a)Prepare the incremental analysis for the decision to make or buy the finials. (Enter negative amounts using eithera negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Net IncoMakeBuyIncrease (DeDirect2$124400 i$$materialsDirect labor155500iVariableoverhead87080 icostsFixedmanufacturing47500i47500costsPurchase413630priceTotal annual$cost

Incremental analysis is prepared to find out the annual cost of the finials for their own curtain…

Answered: rane Ranch Inc. has been manufacturing…

rane Ranch Inc. has been manufacturing its own finials for its curta 00% of capacity, and variable manufacturing overhead is charged to

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 information applies to the questions displayed below.] Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 4 pounds at $9.00 per pound $ 36.00 Direct labor: 3 hours at $12 per hour 36.00 Variable overhead: 3 hours at $8 per hour 24.00 Total standard variable cost per unit $ 96.00 The company also established the following cost formulas for its selling expenses: Fixed Cost per Month Variable Cost per Unit Sold Advertising $ 230,000 Sales salaries and commissions $ 160,000 $ 15.00 Shipping expenses $ 6.00 The planning budget for March was based on producing and selling 28,000 units. However, during March the company actually produced and sold 33,000 units and incurred the following costs: Purchased 165,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was…
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A
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