The green tree company manufacturers wooden The Green Tree Company manufactures wooden toys and is consideringoutsourcing a wooden component. The current manufacturing costs are:⚫ Direct materials: $15 per unit⚫ Direct labor: $12 per unit⚫ Variable overhead: $18 per unit Additionally, a quality controlsupervisor, who earns $60,000 annually, is required for thisproduction.If Green Tree needs 120,000 components annually, the maximum purchaseprice per unit they should consider paying is:a. $45.00b. $45.50c. $27.00d. $33.00

Step 1: Definition of Relevant Costs in OutsourcingRelevant costs are the costs directly impacted by…

Answered: The Green Tree Company manufactures…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* 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 Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…
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Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks: Direct materials Direct labor Variable overhead Fixed overhead (40% avoidable) $100 140 80 150 What is the incremental effect on net income if Notson choses to outsource the production of the 1,000 clocks annually? Should Notson make or buy the clocks?
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Birkenstock is considering adding a new Big Buckle sandal to its current product offerings. Birkenstock expects to price the shoes at $125 per pair. The variable costs to produce one pair are estimated to be: $20 per pair direct materials; $25 per pair direct labor; $5 per pair shipping costs and $5 per pair miscellaneous overhead. The fixed costs for this line of shoes are: $50,000 advertising/promotion; $125,000 manufacturing plant manager salary; $350,000 depreciation expense on manufacturing equipment; and $50,000 other miscellaneous fixed costs. • Birkenstock's best guess is that they will sell 12,000 pairs of Big Buckle sandals in 2021. What is Birkenstock's expected 2021 profit on this product? Type your answer in the first blank below.
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Rossignol makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Rossignol for $18 per pair. Rossignol needs 100,000 pairs of poles per period. Rossignol can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Rossignol currently has the following costs at a production level of 100,000 pairs of poles: Manufacturing Costs Total Cost Cost per pair (100,000 pairs) Direct Materials $750,000 $7.50 Direct Labor 80,000 0.80 Variable MOH 520,000 5.20 Fixed MOH 650,000 6.50 Total $2,000,000 $20.00 1. Should Rossignol outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Rossignol's operating income? 2. If the freed capacity could be used to produce ski boots that would provide $500,000 of operating income, should Rossignol outsource ski pole production?
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