Reuben's Deli currently makes rolls for deli sandwiches itproduces. It uses 30,000 rolls annually in the production ofdeli sandwiches. The costs to make the rolls are:CostsMaterialsLaborVariable overheadFixed overheadReuben's Deli cost dataAmountsIncrements$0.24 per roll0.40 per roll0.16 per roll0.20 per rollA potential supplier has offered to sell Reuben the rolls for$0.90 each. If the rolls are purchased, 30% of the fixedoverhead could be avoided. What are the total relevantcosts?

Note: In the decision-making question of buying or making the goods, the firstly relevant cost for…

Answered: Reuben's Deli currently makes rolls for…

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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Campbell Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,900 6,400 4,100 9,600 26,600 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Campbell for $2.80 each. Required a. Calculate the total relevant cost. Should Campbell continue to make the containers? b. Campbell could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate the total avoidable costs. Should Campbell continue to make the containers? a. Total relevant cost Should Campbell continue to make the containers? b. Total avoidable cost Should Campbell continue to make the containers?
Snickle currently sells hot dogs. The selling price per hot dog is $2 and the variable cost per hot dog is $0.70. During a typical month, the company sells 25,000 hot dogs and reports a profit of $9,750. How many hot dogs must the company sell to breakeven?
Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs Allocated facility-level costs $ 5,700 6,800 3,900 8,100 27,200 One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each. Required a. Calculate the total relevant cost. Should Jordan continue to make the containers? b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate the total avoidable costs. Should Jordan continue to make the containers? a. Total relevant cost Should Jordan continue to make the containers? b. Total avoidable cost Should Jordan continue to make the containers?
The James Company manufactures widgets that sell for $120 each. The company's unit cost for each widget is as follows: A company in another state has offered to purchase 1,000 widgets from James Company at a cost of $90 each. If James were to accept this special order, no additional Fixed Manufacturing Overhead costs would be incurred. Should James accept this special order? Show relevant calculations.
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.20 per switch. Vista 's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?
Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* $ 5,200 6,500 3,600 9,300 26,600 Allocated facility-level costs *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?
Mo Furniture manufactures a frame for use in its production of sofas. When 10,000 frames are produced, the costs per unit are: Direct materials $ 12 Direct manufacturing labor 60 Variable manufacturing overhead 24 Fixed manufacturing overhead 32 Total $128 A company has offered to sell Mo Furniture 10,000 sofa frames for $120 per unit. Fixed manufacturing overhead of $20 per unit used to make the frame could be eliminated if the frames were purchased instead of made. What is the relevant cost per unit to make the frame in this make or buy decision?
Thornton Electronics currently produces the shipping containers It uses to deliver the electronics products It sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,400 3,300 9,900 28,000 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Thornton for $2.60 each. Required a. Calculate the total relevant cost. Should Thornton continue to make the containers? b. Thornton could lease the space it currently uses in the manufacturing process. If leasing would produce $12,100 per month, calculate the total avoidable costs. Should Thornton continue to make the containers? a. Total relevant cost a. Should Thornton continue to make the containers? b. Total avoidable cost b. Should Thornton continue to make the containers?
Every year Blue Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total (a) $3.00 Total relevant cost to make $ 11.00 Net relevant cost to buy $ 8.00 Cullumber, Inc., has offered to sell 7,300 units f part 231 to Blue for $33 per unit. If Blue accepts Cullumber's offer, its freed-up facilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Blue would eliminate 50% of the fixed overhead applied to part 231. 10.00 $32.00 Calculate total relevant cost to make and net cost to buy.
Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,320 remotes is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total Cost $ 67,080 $ 56,760 $ 30,960 $ 51,600 $ 206,400 Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 2. Compute the difference in cost per unit between making and buying the remotes if $20,640 of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 3. What is the change in net income if fixed cost of $20,640 can be avoided and Frannie could rent out the factory space no longer in use for $20,640?
Fuller Company makes frames. A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each. Normally, Fuller would charge $90 per frame for this type of order. Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the frames are working at Fuller. Their wages will be paid whether or not the special order is accepted. Fuller's policy is to avoid layoffs to the extent possible. . Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order? cost of yarn and backing cost of setup labor the no-layoff policy the use of machinery the machining and electricity
Crane Company manufactures dog food for distribution in Washington, Oregon, and California. A dog food distributor from Florida has approached Crane and offered to purchase 264000 pounds of dog food for $1.40 per pound. Crane can produce 2048000 pounds of dog food per year, and its results for last year are as follows: Sales (1844000 at $1.65) Variable costs Contribution margin Fixed costs Operating income $3042600 O $1392800 O $1336400 O $2084400 O $1270400 1106400 1936200 814000 $1122200 If Crane accepts the offer, it will only be able to sell 1784000 pounds of dog food at the regular price due to its capacity constraints. What will Crane's total operating income be next year if it accepts the offer?

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