Recher Corporation uses part Q89 In one of Its products. The company's Accountlng Department reports the following costs of producing the 7,100 units of the part that are needed every year. Per Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Unit $7.50 $ 4.10 $ 8.00 $ 3.00 $ 2.50 $ 1.30 An outside supplier has offered to make the part and sell it to the company for $26.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the enti company. If the outside supplier's offer were accepted, only $3,200 of these allocated general overhead costs would be avoided. In addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $17,600 per year for that product. Required: a. Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company. p. Which alternative should the company choose?
Recher Corporation uses part Q89 In one of Its products. The company's Accountlng Department reports the following costs of producing the 7,100 units of the part that are needed every year. Per Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Unit $7.50 $ 4.10 $ 8.00 $ 3.00 $ 2.50 $ 1.30 An outside supplier has offered to make the part and sell it to the company for $26.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the enti company. If the outside supplier's offer were accepted, only $3,200 of these allocated general overhead costs would be avoided. In addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $17,600 per year for that product. Required: a. Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company. p. Which alternative should the company choose?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:Help
Save
Recher Corporation uses part Q89 In one of Its products. The company's Accounting Department reports the following costs of
producing the 7,100 units of the part that are needed every year.
Par
Unit
$ 7.50
$ 4.10
$ 8.00
$ 3.00
$ 2.50
$ 1.30
Direct materials
Direct labor
Variable overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
An outside supplier has offered to make the part and sell it to the company for $26.00 each. If this offer is accepted, the supervisor's
salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was
purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire
company. If the outside supplier's offer were accepted, only $3,200 of these allocated general overhead costs would be avoided. In
addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an
additional segment margin of $17,600 per year for that product.
Required:
a. Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the
company.
b. Which alternative should the company choose?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside
the company.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
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,
Accounting
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