The profit Will Sycamore Shops has a capacity of 55,000 units and is currently producing and selling 50,000 at$55 a unit. The present cost structure, on a per-unit basis, is:Direct materialDirect labor$2012Variable overhead 7Fixed overhead8An order for 12,000 units has been received from a Japanese company at a price of $50 per unit.The order size cannot be reduced. If the order is accepted, the profit will:

Concept of Variable CostsVariable costs are expenses that change directly with the level of…

Answered: Sycamore Shops has a capacity of 55,000…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 15E

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Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?
Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost data represents average cost per unit for 15,000 units of production. Using the cost data from Rose Company, answer the following questions: If 10,000 units are produced, what is the variable cost per unit? If 18,000 units are produced, what is the variable cost per unit? If 21,000 units are produced, what are the total variable costs? If 11,000 units are produced, what are the total variable costs? If 19,000 units are produced, what are the total manufacturing overhead costs incurred? If 23,000 units are produced, what are the total manufacturing overhead costs incurred? If 19,000 units are produced, what are the per unit manufacturing overhead costs incurred? If 25,000 units are produced, what are the per unit manufacturing overhead costs incurred?
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
Marks Co. has a capacity of 100,000 units. They are currently producing and selling 90,000 units at $50 per unit. The cost of a unit at the present production level is as follows: Direct materials Direct labor Variable overhead Fixed overhead Per unit $19 11 6 9 $45 An order for 10,000 units has just been received from a foreign company at a price of $42 per unit. Freight costs of $2 per unit would be required. (A) Should Marks accept the order? Why or why not? (B) Assume the order was for 12,000 units. Should Marks accept the order? Why or why not?
The Northern Company manufactures 2,800 units per year. The full manufacturing costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Average Total $2.00 8.00 6.00 fixed manufacturing overhead 6.00 $22.00 The Southern Company has offered to sell Northern Company 2,800 units for $15 per unit. If Northern Ring Company accepts the offer, $14,000 of fixed overhead will be eliminated. Northern should: Select one: о a. Buy the units: the savings is $16.800 о b. Buy the units; the savings is $33,600 о c. Make the units; the savings is $2.800 о d. Make the units; the savings is $16.800
You make component X in-house at a cost of $16 per unit, which consists of $2 direct labor per unit, $7 direct materials per unit, $6 fixed overhead per unit, and $1 variable overhead per unit. You need 1,000 units of X per month. An outside supplier has offered to sell component X to you at $12 per unit. If you outsource the production of X to the supplier, how much will your profit change in the short term? decrease by $4,000 decrease by $2,000 O increase by $2,000 O increase by $12,000 O increase by $4,000
San Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell San Clemente the subcomponent for $2.85 a unit. If San Clemente accepts the offer, by how much will net income increase (decrease)?

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