Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $11.00, not including fixed costs. If 39,658 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $11.00, not including fixed costs. If 39,658 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Munabhai
Liguanea Pharmaceuticals Limited (LPL) currently sells a product the “sovereign” for $2200. This price is based on annual demand. Analysis indicates that if the company increase the price by $100 annual demand will fall by 400 units. At the current price 4,000 units are demanded. The product has the following cost structure per unit: Direct material $225 Direct labour $75 Direct expenses $150 Variable overheads $90 Fixed overheads $300 Variable selling expense $60 Fixed selling expenses $450 Management wants to know the optimal production quantity and its maximum profits. Determine the price equation Determine the optimal price and quantity Determine the optimal profits.
[The following information applies to the questions displayed below.] Astro Company sold 22,500 units of its only product and reported income of $60,000 for the current year. During a planning session for next year's activities, the production manager notes that variable costs can be reduced 45% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $155,000. Total units sold and the selling price per unit will not change. ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales ($55 per unit) Variable costs ($50 per unit) Contribution margin Fixed costs Income 1. Compute the break-even point in dollar sales for next year assuming the machine is installed. (Round your answers to 2 decimal places.) Contribution margin Contribution Margin Ratio Numerator: Contribution margin per unit $ 1 Fixed costs per unit $ 1,237,500 1,125,000 112,500 52,500 $ 60,000 $ Denominator: Selling price…
Please help me
Farrow Company reports the following annual results. Contribution Margin Income Statement Sales (460,000 units) Variable costs Direct materials Direct labor Overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income (a) Compute the income or loss for the special offer. (b) Should the company accept or reject the special offer? Required A Required B Per Unit $15.00 The company receives a special offer for 46,000 units at $13 per unit. The additional sales would not affect its normal sales. Variable costs per unit would be the same for the special offer as they are for the normal units. The special offer would require incremental fixed overhead of $184,000 and incremental fixed general and administrative costs of $198,000. SPECIAL OFFER ANALYSIS Contribution margin Income (loss) 2.00 4.00 2.50 6.50 2.00 1.50 $ 3.00 Complete this question by entering your answers in the tabs below. Required A Annual Total $ 6,900,000 Compute the income or loss for the…
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $ 100,000, which includes fixed costs of $ 40,000 and variable costs of $ 60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $ 15,000. If Voltaic outsources, what will be the effect on operating income?A. decrease of $11,000B. increase of $ 11,000C. increase of $ 15,000D . decrease of $ 8,000
A company makes 36,000 motors to be used in the production of its blender. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the blender. The price offered to the company for this motor is $23.95. There would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice O O O ($68,400) $214,200 $9.50 $ 8.50 $ 3.45 $ 4.40 90,000 $158,400
Ahrends Corporation makes 46,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 14.30 23.90 3.00 28.30 $69.50 An outside supplier has offered to sell the company all of these parts it needs for $55.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $368,000 per year If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $24.90 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products What…
Alpine Luggage has a capacity to produce 430,000 sultcases per year. The company is currently producing and selling 350,000 units per year at a selling price of $400 per case. The cost of producing and selling one case follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Total costs Selling price per case Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs Net profit (loss) per case The company has received a special order for 40,000 sultcases at a price of $249 per case. It will not have to pay any sales commission on the special order, so the variable selling and administrative costs would be only $52 per sultcase. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations: Sales revenue Variable costs Manufacturing Selling and…
Need Help
Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice O O $78,900 increase. $42,100 increase. $37,900 decrease. $ 129,000 20,500 60,000 80,000 $18,900 decrease.
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $11.00, excluding fixed costs. If 39,879 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a.$558,306 cost decrease b.$119,637 cost increase c.$319,032 cost increase d.$119,637 cost decrease